Glossary

ADB: Asian Development Bank.

AGM: Annual General Meeting

AMCL: Asset Management Company Limited.

CDBL: Central Depository Bangladesh Ltd.

CIP: Cumulative Investment Plan.

CSE: Chittagong Stock Exchange.

CMD: Capital Market Development.

CML: Capital Management Limited.

DSE: Dhaka Stock Exchange.

DGM: Deputy General Manager.

EBR: Economic and Business Research.

External Audit: Process of reviewing the financial statement of an organization by an

independent 3rd party.

Efficient Capital Market: A capital market in which security prices rapidly reflect all

the information about security.

Internal Audit: Done with an organization identify the entity’s strength and weakness.

Investment: The current commitment of money for a period of time to derive more future

economic benefit.

Investment Company: A firm that sells shares of the company and uses the proceeds to

by stock, bonds or other financial instruments.

MIS Report: Management Information Systems Report.

MOU: Memorandum of Understanding.

Mutual Fund: An investment company that pools money from shareholders and invests

in a variety of securities includes stocks, bonds and money market securities.

PAD: Project Appraisal Division.

Portfolio: A sort of investment having different pattern of returns over time.

STCL: Securities Trading Company Limited.

Underwriting: An arrangement whereby underwriters cannot themselves to sell the

security issue to the public on behalf of a company.

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CHAPTER-1

CHAPTER ONE

` INTRODUCTION

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1.1 Introduction:

Bangladesh is one of the least developed countries in the world with minimum natural

and financial resources. The development of Bangladesh is being hindered due to lack of

insufficient capital. To accelerate the phase of industrialization through the development

of capital market and broadening the base of investment, 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 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), reforms in

operational strategies and business policies have been implemented by establishing and

operating subsidiary companies with ICB as the holding company.

1.2 Origin of the study:

To match theoretical knowledge with that of practical field, internship plays a vital role

for the students of business education. With this program the student get experiences and

know that how much theoretical knowledge is deviated from the real facts. To give that

test, each business students of Department of Accounting and Information Systems,

University of Dhaka has to carry out an internship program. That’s why; I had been

placed for internship program in Investment Corporation of Bangladesh (ICB) for a

period of three months.

1.3 Background of the study:

I have been placed in the Investment Corporation of Bangladesh (ICB) for internship

program and there was the opportunity to see the overall functions of the organization

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during my three month internship program. To match theoretical knowledge with that of

practical field, internship plays a vital role for the students of business education. With

this program the student get experiences and know that how much theoretical knowledge

is deviated from the real facts. For gathering these types of practical knowledge every

student of Department of Accounting And Information Systems has to carry out the

internship program.

1.4 Objectives of the Study:

1.4.1. General objectives

The main objective of this report is to assess the performance of a subsidiary

company, named ICB Capital Management Company Limited (ICB CML).

1.4.2. Specific objectives

Specific objectives of this report are as follows:

To have an over all idea about the ICB CML.

To relate classroom learning with real life situation.

To investigate the different functions performed by different

department of ICB.

To assess the performance of the different schemes effectiveness of

the schemes.

Help the potential investors for assessing the investment decision.

To evaluate the three subsidiaries for taking investment decision.

To have an idea about three of its role and contribution to the

capital market.

To explore the problems of ICB.

To give suggestion to over come the problem.

To suggest how can they improve their services.

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1.5 Methodology:

Main aim of this report is to gain experience so I observed various department and

gathered relevant information. Before conducting the study, the topic of study was

selected. To conduct the study various methods, technique and tools are used. The

necessary data were collected from two sources. They are-

1.5.1. Primary sources:

Primary sources of data mean those which were collected from the direct field. I

worked three month in ICB and discussed with the personnel of department in-

charge. They provided me different data related to the Problems of operations..

1.5.2. Secondary sources:

The secondary data has been collected from articles,

Annual reports of ICB

Annual report of ICB Asset Management Company Limited

Annual report of ICB Capital Management Company Limited

Annual report of ICB Security Trading Company Limited

Manuals of ICB

Various journals, books and websites.

1.6 Scope of the study:

Since I was placed in the ICB and I worked in the head office, I gave more concentration

on various important operations (Specially ICB AMCL, CML, and STCL). The study

was confined only into the head office and given more concentration on it. The empirical

part included only the published information and current practices of Investment

Corporation of Bangladesh (ICB).

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1.7 Limitation of the study:

In preparing this report I have faced a little limitation. During this Internship Report I

have worked all the departments of ICB one after another. So in this corporation part I

mainly connection of the functions of all departments. ICB is a large corporation, but

study time is too short on an organization like ICB and this was the main limitations of

my Internship Program.

Other constraints I faced during the course of my study are as follows:

Official’s secrecy of ICB was also a problem to me.

Relevant papers and documents were not available sufficiently.

At the time of face to face discussion with officials, there were no

sufficient chairs and tables

Our capital market is not so strong and mature so the various financial

analyses can not be applied to judge the performance of the

subsidiaries of ICB.

To concentrate only ICB CML, I have failed to focus on other

schemes.

Bureaucratic Complexity

Government Employees are Reluctant to provide sufficient

information.

Information is collected only from head office.

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CHAPTER TWO

BACKGROUND AND OVERVIEW OF ICB

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2.1. Background of ICB

The striking contradiction in most of the underdeveloped world including Bangladesh is the large availability of local capital on the one hand and a relatively small use of such capital in industry on the other hand. Most of the privately owned capital is either invested in non-productive sector or has gone to safe heaven in foreign countries. Large amounts of capital have also been found in the pension funds and in the reserve of insurance companies. These funds if channeled into industry, the problem of financing industrialization would be solved to a great extent. Thus, application of a sound policy regime with regard to tax rate, interest rate, accounting standards and development of some of the financial institutions such as investment financing companies, stock exchange, mutual fund etc. are very crucial in mobilizing capital for industrial finance as well as development of capital market.

Investors want to invest their surplus in investments, which offer safety, liquidity as well as attractive rates of return. Perception of investment media, of course varies from investors to investors. To meet the needs of investors of all types, a wide range and adequate number of securities should be made available in the capital market. Institution and institutional supports are absolutely necessary for such capital market activity. ICB, the national investment house, is the lone organization to perform the activities by creating demand for securities and on the other hand to ensure the supply of securities in Bangladesh capital markets.

Investment Corporation of Bangladesh was established on October 1, 1976, under the

ICB ordinance No. XL of 1976 to fulfill the following objectives:

To encourage and broaden the base of investment.

To develop the capital market.

To mobilize savings.

To provide for matters ancillary thereto.

The establishment of ICB was one of the significant measures taken by the Government to accelerate the pace of industrialization and develop a well-organized capital market. It catered to the need for institutional support to meet the equity gap of the industrial enterprises having public company status and in view of the national policy of increasing the rate of managerial savings to foster self-sustained economy and the role of ICB has attained a pivotal dimension in the fulfillment of its objectives.

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. Through restructuring program of ICB under Capital Market Development Program (CMDP) initiated by the Govt. of Bangladesh and the Asian Development Bank (ADB), three subsidiary companies, e.g. the ICB Capital Management Limited, ICB Asset Management Company Limited and ICB Securities Trading Company Limited have been created to carry out merchant

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banking, mutual fund operations and securities trading functions respectively. The companies were incorporated under Companies Act, 1994 with the Registrar of Joint Stock Companies on December 5,2000. Certificate of Commencement were also obtained on the same day. Preliminary registrations of the companies with the Securities and Exchange Commission (SEC) were obtained on December 19, 2000 under certain terms and conditions. Subsequently, Government of Bangladesh was approached to provide Tk. 5.25 crore soft loan to ICB to enable it as the holding company to inject equities to the subsidiary companies. An arrangement in this behalf was signed between Government of Bangladesh & ICB on June 14, 2001.

Earlier, independent Board of Directors for three companies was constituted with 50% directors from ICB and the rest from private sector, with no interlocking of the Boards. As per relevant provision of the ICB ordinance, their own Memorandum and Article of Association, Companies Act, 1994 and other relevant laws applicable to them, shall guide the subsidiary companies. As per the provision of ICB Ordinance (amended), after commencement of the subsidiaries, ICB shall carry out only the old business while the new organization of businesses shall be undertaken by the respective subsidiary companies. The creation of subsidiaries under ICB is one of the major events in the annals of ICB. It is expected that as a result of this fundamental and strategic change in modus operandi of ICB, the country’s capital market and in particular ICB will be strengthened.

2.2. ICB At a Glance

Name : Investment Corporation of Bangladesh (ICB)

Date of Incorporation : October 1, 1976.

Nature : Investment Banking Company

Related Law : Investment Corporation of Bangladesh Ordinance

1976 (no. XL 1976)

Authorized capital : Tk. 100 crores

Face value of Share : Tk. 100.

Number of Shares : 1 Crore

Paid Up Capital : Tk. 50 Crore.

Status : Corporation (Listed on the Stock Exchange).

Subsidiaries : ICB Asset Management Company Ltd. (AMCL)

ICB Capital Management Company Ltd. (CML)

ICB Security Trading Company Ltd. (STCL)

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2.3 Objectives 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.

2.4 Business policies of ICB:

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 To

act on commercial consideration with due regard to the interest of

industry, commerce, depositors, and 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 and thereby spread the risk

of underwriting.

To develop and encourage entrepreneurs.

To diversify investments.

To induce small and medium savers for investment in securities.

To create employment.

To encourage Investment in IT sector.

To encourage investment in Agro-based and information &technology

sectors.

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2.5 Functions of ICB:

In order to achieve the previously mentioned objectives, the corporation may carryout the

following functions:

Underwriting of initial public offering of shares and debentures

Underwriting of right issue of shares;

Direct purchase of shares and debentures including placement and

equity participation;

Providing lease finance to industrial machinery and other

equipments singly or by forming syndicate;

Managing existing investment Accounts;

Managing existing Mutual Funds and unit fund;

Managing Portfolios of existing businesses

Operating on the Stock Exchanges;

Providing advance against ICB Unit and Mutual Fund certificates

To act as Trustee and custodian

Providing Bank Guarantee

Providing Consumer Credit

Providing investment counsel to issuers and investors;

Participating in Government divestment Program;

Participating in and financing of joint-venture companies;

Introducing new business products suiting market demand

Dealing in other matters related to capital market operations.

To supervise and control the activities of the subsidiary companies

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2.6 Capital Structure: (TK. in

crore)

Particulars As on June30 Increase/decrease (%)

2008 2007

Paid-up capital 50.00 50.00 -

Reserves 164.61 122.61 34.25

Retained profit 16.33 13.82 13.82

Long-term govt. loan 4.20 4.55 -7.69

Debentures 31.80 41.80 -23.92

Others 14.05 16.29 -13.75

Total 330.39 249.07 32.89

Capital Structure as on June 30, 2007-2008:

Capital Structure

20%

48%

6%

2%

17%

7%

Paid-up capital Reserves Retained profit

Long-term govt. loan Debentures Others

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2.7 Shareholding Pattern:

Shareholding position as on 30 June 2008 are as follows:

SL

No

Shareholders No. of

shareholders

No. of

Shares

Percentage of

shareholdings

1. Government of Bangladesh 1 1350000 27.00

Nationalized Commercial Bank 4 1137220 22.74

2. Development Financial

Institutions

2 1281550 25.53

5. Insurance Corporations 2 617781 12.35

6. Denationalized Private

Commercial Banks

2 454263 9.08

7. Private Commercial Banks 3 28286 0.57

8. Foreign Commercial Banks 2 110 0.01

9. First BSRS Mutual Fund 1 5750 0.12

10. Other Institutions 12 17454 0.34

11. General Public 1109 107906 2.16

Total 1138 5000000 100.00

Percentage of Share holding graphical pattern as on June30, 2007

Other Institutions0.59%

General Public1.87%

Private Commercial

Banks0.57%

Foreign Commercial

Banks0.01%

Insurance Corporations

12.35%

Denationalized Private

Commercial Banks9.09%

First BSRS Mutual Fund

0.15%

Government of Bangladesh

26%

Nationalized Commercial Bank

22.75%

Development Financial

Institutions25.53%

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2.8 Share Price

Share price of ICB varied from lowest Tk. 400.0 to highest Tk,5098.00 in the stock

exchanges during the year. As on 30 June 2008, the market price of share was Tk.

3751.75 and Tk. 4323.00 in the DSE and CSE respectively. The price movements of

ICB’s share on DSE are shown graphically in below:

2.9Transfer of Shares:

The volume of shares transferred increased substantially during the year. 626564 shares

were transferred during 2006-07 as against 38598 shares transferred in 2005-06 showing

an increase of 1523.31 percent.

2.10. Milestones of ICB:

Particular Date of

Establishment/Commencement

ICB 1st October 1976

Investors’ Scheme 13th June 1977

First ICB Mutual Fund 25th April 1980

ICB Unit Fund 10th April 1981

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Second ICB Mutual Fund 17th April 1984

Third ICB Mutual Fund 19th May 1985

Fourth ICB Mutual Fund 6th June 1986

Fifth ICB Mutual Fund 8th June 1987

Sixth ICB Mutual Fund 16th May 1988

Nomination as country’s nodal DFI in SADF 7th May 1992

Seventh ICB Mutual Fund 30th June 1995

Decision for 100% Automation 14th July 1996

Eighth ICB Mutual Fund 23rd July 1996

Purchase of own Land & Building 11th December 1997

Participation in equity of SARF 16th January 1998

Advance Against Unit Certificates Scheme 12th October 1998

Term Deposit 13th January 1999

Lease Financing 22nd April 1999

“ The Investment corporation of Bangladesh

(Amendment) Act 2000” Passed in the Jatiya

Sangsad (Parliament) and honorable

President’s assent there of

5th and 6th July 2000

Formation & Registration of 3 Subsidiary

Companies

5th December 2000

Computer Training Program 25th March 2001

Commencement of operations by subsidiary Companies:

ICB Capital Management Ltd. 1st July 2002

ICB Asset Management Company Ltd. 1st July 2002

ICB Securities Trading Company Ltd. 13th August 2002

Registration as trustee with SEC 20th August 2002

Registration as a Custodian with SEC 20th August 2002

Bank Guarantee Scheme 21st June 2003

Advance Against Mutual Fund Scheme 21st June 2003

Consumer Credit Scheme 15th February 2004

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2.11 Various Departments of ICB

The Division wise various departments of ICB are given below:

Division Department

1. Administration 1. Personnel

2. Establishment

2. Merchandising 3. Investors

4. Shares

5. Transaction

3. Funds 6. Unit Sales

7. unit registration & Procurement

8. Mutual Funds

4. Accounts and Finance 9. Central Accounts

10. Project Loan Accounts

5. Computer 11. System Analysis

12. Programming

13. Data Management

6. Loan Appraisal 14. Loan Appraisal

15.Economic and Business Research

Department

7. Implementation & Recovery 16.Implementation

17.Covery & Follow-up

8. Legal Affairs 18.Public Issue

19.Law

2.12 Products of ICB

(a) Private Placements

ICB is authorized to act as an agent of the issuers and investors for private placements of

securities. Under this arrangement, ICB places securities to individuals/institutions on

behalf of the issuer for which it charges fees. ICB acquires shares/ securities for its own

portfolio.

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(b) Underwriting

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 an excellence position to attract the

potential investors to the proposed issue of shares, debentures and other securities for

successful floatation of IPO and placement.

 

(c) Custodian and Banker to the Issues

To act as the custodian to the public issue of Open-end & Closed-ended 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. 

(d) Mergers 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 operational results. Besides, in case of divestment, the

corporation, through network and established business relationship, bring buyers and

sellers together, help them negotiate final agreement and advice on the emerging

corporate structure.

 

(e) 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.

(f) 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 tender o bidding; (ii) Performance Bond

for helping the business community to continue their business smoothly by fulfilling their

obligations promised by them to their clients; (iii) Customs Guarantee for solving

different disagreements between the customs authority and the business classes at the

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initial stage. The maximum limit guarantee in Tk. 2.00 crore and would be issued against

at least 20 per cent cash and 80 percent easily encashable securities or against 100 per

cent cash margin. Re-guarantee from other financial institution is required for guarantee

against the amount exceeding Tk. 2.00 crore.

(g) Consumer credit Scheme

As part of business diversification program ICB has introduced “ Consumer Credit

Scheme “ in 2003-04 looking at the need of various household commodities of different

professionals of govt., semi-govt., autonomous bodies and some established private sector

organization. Under this scheme one can enjoy minimum of Tk. 1.00 lac but maximum of

Tk. 5.00 lac credit facilities. The rate of interest on the loan is reasonable and

competitive.

(h) 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, charges and other terms and conditions are determined on the

basis of type of assets and the extent of assistance required by the applicants. Since

introduction of this scheme in 1999 good responses have been received from the

intending lessees.

(i) Trustee to the debenture and Securities assets

ICB is acting as trustee to the debenture issue and asset-backed securitized bonds. ICB

acted as trustee to the issue of 17 companies of which 7 companies has been redeemed

successfully.

(j) Investors’ Scheme

The Investors' Scheme was introduced in June 1977. Over the years this scheme has

grown tremendously. ICB, at its discretion, may grant upto two times loan against the

assets of an account subject to a maximum limit of Tk. 3.00 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

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reasonable return, ICB operates and manages only the old accounts and new accounts are

being opened and managed by the ICB Capital Management Ltd. a subsidiary of ICB.

(k) ICB Unit Fund

It is an open-end mutual fund scheme launched in April 1981, through which the small

and medium savers get opportunities 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 Tk. 11.50 to Tk. 25.00 per unit. Investment in units enjoys tax benefits,

amount being applicable as per law. However, under the ICB’s restructuring program new

unit certificates are being sold by ICB’s subsidiary company, the ICB Asset Management

Company Ltd.

(l) ICB Mutual Fund

ICB has so far floated eight closed – end mutual funds. The First ICB Mutual fund was

floated on 25 April 1980, while the Eighth ICB Mutual Fund was floated on 23 July 1996.

The aggregate size of these funds is Tk. 17.50 crore. Dividends declared on the funds

were very attractive ranging from 15.00 to 210.00 per certificate for 2003- 04. One can

invest in such funds through the stock exchanges with which these funds are listed.

Through corporate restructuring, new mutual funds are being floated through ‘ICB Asset

Management Company Ltd.’ – a subsidiary of ICB.

(m) Advance against ICB Unit Certificates Scheme

This is ICB's another newly introduced scheme, especially designed for the ICB unit

holders to meet their emergency fund requirement for investment in securities. One can

borrow maximum of Tk. 85 per unit by depositing his/her unit certificates under lien

arrangement from any of the ICB offices where from such unit certificates were

purchased. The exiting rate of interest on the loan is very reasonable and competitive.

(n) Advance against Mutual Fund certificates Scheme

Advance against ICB Mutual Fund certificates Scheme was introduced in 2003, designed

for the ICB Mutual Fund Certificate-holders 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 depositing his/her certificates under lien

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arrangement from any of the ICB offices. The rate of interest on the loan is reasonable

and also competitive.

(p) Investment Portfolio of ICB

Being the largest institutional investor ICB contributes significantly to the development of the country's capital market through active portfolio management, which is one of the important functions of ICB. As on 30 June 2008, the market of securities of ICB’s investment portfolio was Tk.394.35 crore against the not investment value of Tk.421.12 crore.

2.13. Role of ICB in the Capital Market:

As in the previous years, ICB and its subsidiary companies played very important and

expanded roles through participation in both the primary and secondary markets to

quicken the pace of industrialization and to development and enlarge a vibrant and

sustainable capital market in the country.

As on 30 June 2006, the number of ICB assisted securities were 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

were 80.

In the reporting year, through the purchase and sale of securities for ICB’s investment

portfolio, unit fund and mutual funds portfolios and on behalf of investment account

holders ICB made significant contribution in maintaining stability, reliability and

liquidity of the stock market. During 2005-2006, the total transaction of ICB and its

subsidiary companies in both the bourses was Tk 681.51 crore which was 36.05 percent

lower than the total transaction of Tk 1065.63 crore in the previous year. Though the total

transaction has decreased during the year under review, but the rate of contribution of

ICB and its subsidiary companies’ contribution to total turnover (Tk 5741.61 crore) of

both the bourses was 11.87 percent in the preceding year.

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2.14. Management of ICB:

The head office of the corporation as per the requirement of the ordinance of ICB is

located at Dhaka. The general direction and superintendence of the corporation 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.

The managing directors of ICB to be appointed by the government. The board in

discharging its functions acts on commercial consider rations with due regard to

the interests of industry and commerce, investment climate, capital market,

depositors, investors and to the public interest generally and is guided in question

policy by the institutions, if any, given to by government which shall be sole

judged as to whether a question is a questio9n of policy or not.

The managing director is the chief executive of the corporation. The corporation has an

executive comprised of 5 people including managing director.

2.15. Board of Directors of ICB:

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The board is comprised of 11 directors. Exchange managing director, all directors are

non-executive and independent and represent government, bank, Insurance Corporation,

financial institutions and general public. The board of directors of ICB as on 30th June

2007 is as follows:

1. Chairman,

Mr. Feroz Ahmed

Secretary, Ministry of Commerce

Government of the People’s Republic of Bangladesh.

2. Managing Director,

Mr. Md. Ziaul Haque Khondker.

Directors:

a) Brigadier General Md. Ahsan Habib

Director,

Bangladesh National Cadet Corps.

b) Md. Amanullah

Managing Director

Bangladesh Shilpa Bank.

c) S.M. Aminur Rahman

Managing Director

Sonali Bank.

d) Md. Mukter Hussain

Managing Director,

Janata Bank.

e) Hussain Jamil

Commissioner

Chittagong Division, Chittagong

f) Habibullah Bahar

Economic Adviser

Bangladesh Bank.

g) F R M Hafiz ul Islam

Managing Director,

Bangladesh shilpa Rin Sangstha .

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h) Syed Abu Naser Bukhtear Ahmed

Managing Director & CEO

Agrani Bank

i) Elias Ahmed

Managing Director

Sadharan Bima Corporation

Secretary,

Kazi Sanaul Hoq.

Deputy General Manager

2.16. Administration and Human Resource:

Investment Corporation of Bangladesh (ICB) is 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, Lone 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 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 is headed by General Manager.

2.17 Operations entrusted to subsidiaries

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(A) ICB Capital Management Limited (ICML)

(a) Underwriting

In order to raise long-term debt and equity from the primary market, the Government

bodies, Enterprises Corporation or Companies may seek intermediary assistance from

ICML in the form of underwriting.

(b) Issue Management

To act as the manager to the issue of shares and debentures, ICML provides professional

services in respect of syndicate underwriters and bankers to the issue. Besides, it also

helps in preparing prospectus, getting their approval from SEC and arranges publication

of the same.

(c) Placement of Shares

ICML acts as a placement agent.

(d) Investment Counseling

ICML provides investment counsel to the issuers and investors' including financial

engineering and corporate advisory services.

(e) Managing Investment Accounts

ICML, at its discretion, may grant loan at a ratio of 1:1 against the assets of an account

subject to a maximum limit of Tk.25.0 lac. An accountholder 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,

ICML provides professional advice and other support services.

(B) ICB Asset Management Company Ltd. (IAMCL)

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Mutual Funds

ICB Asset Management Company Ltd. has so far floated three closed-end mutual funds

and two open-end Mutual Funds through which the small and medium savers get

opportunities to invest their savings in a balanced and relatively low risk portfolio. The

closed-end mutual funds are, namely, ICB AMCL First Mutual Fund of Tk. 10.0 crore ,

ICB AMCL Islamic Mutual Fund of Tk. 10.0 crore and ICB AMCL NRB Mutual Fund of

Tk…… crore. The open-end mutual funds are, namely, ICBAMCL Unit Fund and ICB

AMCL pension Holders' Unit Fund. Investors have shown overwhelming interest in all

the mutual funds. One can invest in the closed-end mutual funds through the stock

exchanges. ICB AMCL Unit Certificates are sold and repurchased on the counters of ICB

AMCL Head Office and the branch Offices of ICB. ICB AMCL pension Holders' Unit

Certificates are sold exclusively to the retired pension holders.

(C) ICB Securities Trading Company Ltd. (ISTCL)

ICB Securities Trading Company Ltd. performs stock brokerage activities. The Company

maintains its activities to become the most active broker of both DSE and CSE. The

Company has started trading of securities for general investors alongside the institutional

investors from the beginning of 2003-2004. ISTCL has obtained license from SEC to act

as the full service Depository participant (DP) in Central Depository Bangladesh Ltd.

(CDBL).

25

CHAPTER Three

FUNCTIONS OF DIFFERENT DEPARTMENT

The functions of the various departments is given below

3.1. - Personnel Department.

26

Recruitment of officials and staffs.

Handling all personal matters including confirmation, posting, transfer, fixation leaves etc.

Processing of all promotion and retirement

Dealing retirement benefits I,e gratuity, pension, provident fund etc.

Controlling of attendance.

Processing of Annual Confidential Report.

Maintaining all types of disciplinary action.

Arrange training for the employee both in home and abroad.

Maintaining liaison with ICB employees unions

3.2. - Secretary's Department.Arranging meeting of board of directors Executive Committee and other committee

Placing working papers to the Boards of Director

Maintaining attendance register of directors.

Obtaining signature of the chairman on the minutes book

Collect and send any action needed to approve or implement

Maintaining register of shareholders of the company.

Send minutes of the meeting to the Board and Government of Bangladesh.

Making payments of dividend to the shareholders.

Arranging of Annual General Meeting

Arrange transfer splitting of shares and issuance of duplicate Certificates.

3.3. - Economic & Business Research Department; MIS Cell,

Sales and purchase of holding of Ten(10) portfolios.

27

Consider marked trend and. related companies position to take necessary steps to take diversify portfolio risk.

It fixes budget for branches and department In the shadow of overall budget analyze their performance and finalize consolidate EBR report to the management.Finalize annual report of ICB and fund subject to the approval of the Board.

Prepare five year performance appraisal reports of the listed companies.

Prepare MIS report that Contains Update business and administrative performance.

Convey, EBR’s decision directly of through computers department o the necessary department.

Prepare Board memo regarding declaration of dividends on. ICB's own portfolio, Unit and mutual funds.

Analysis securities and categorize them.

Maintain information related to DSE, CE, dividend/right/bonus declared by different companies Public issue half yearly accounts of listed companies etc.

Maintain liaison with ministry of finance Bangladesh Bank Foreign Investor and provide ICB related information to interest parties

Arrange of offloading of government portion of shares in different companies and public corporations as per privatization decision.

3.4. - Investors Department.

Opening and maintaining of investors account Sanction loans against deposit in Investment accounts, provide account loan margin at 1:2 ratio subject to ceiling of Tk-. 3 Laces at a rate of Interest of 13. 5 %

Buy and sell shares on behalf of the investors both from the primary and secondary, market.

Implement negotiated over the counter transaction between investment account holder

Counsel investors in respect of building up their portfolios.

Withdraw funds and shares from investment accounts.

Issue Income tax certificates. Portfolio Statement account statement etc

Receive direct applications against public issue of shares.

Receive allotment letters from the companies.

28

Collect commission as banker to the Issue and brokerage commission from the companies.

Processing of withdrawal of fund

Calculate quarterly interest of all investors account

3.5. - Shares Department & Reconciliation cell.

To avoid complexity, the function of department is divided into four section

Funds Portfolio sectionInvestor’s portfolio sectionSale and Withdrawal SectionDividend Collection Section

Funds Portfolio Section

Receiving of IPO shares, making arrangement of filling up of 117 forms and splitting, up shares information market.

Receiving of securities from the securities from the companies after registration Splitting up and arrangement for safe preservation.

Receiving of sales order from securities purchase & sale Committee and providing information to the transaction department.

Delivering of sold securities to the transaction department

Receiving Of bonus and right share, and allocates properly.

Investors Portfolio Section

The purchase of shares In the investors accounts.

Receives shares from the transaction department for preservation

Send shares and. debentures at the time of book closure for making, registration in the name of the particulars investors.

Receives shares and debenture from the companies after registration

Collect bonus or right shares and allocate to accounts accordingly.

Sale and Withdrawal Section

Receive sale and withdrawal order from the investors department

29

Examine the actual existence of securities and to get out of the same from the volt

Give information to the computer department about salability of the Securities

Making arrangement for the signature of attorney & filling up of 117 form

Send the securities to the investor department in case of withdrawal

Dividend collection SectionProcurement of dividend and interest declared by the different companies

3.6. - Unit Sales Department.

Act as manager of unit fund

Sell and issue unit certificate to the applicant

Repurchase unit certificate

Co-ordinate activities of Bank Branches in respect of unit sale and repurchase Determine sale and repurchase prices of unit certificate it to Bank Branches and ICB Branches

Spilt and consolidate unit certificates is as requested by unit holders

Issues and distributes Cumulative investment plan (CIP) Certificates

Cancellation of surrender certificate

3.7. - Unit registration and procurement department.

Register and transfer unit certificates

Maintain separate register for unit holder CIP

Verify signature of transfer deed

Issuance dividend warrants and CIP c-Certificates to the holders.

Procure unit certificates to ICB sale offices branches as well as Nominated Bank Branches

Evolve various prescribe forms and registers print them and distribute them among

ICB Branches and Bank Branches as per requirement

Coordinate all activities relating to procurement and issue of unit certificates

30

3.8. Mutual Funds Department

Act as manager of all mutual funds

Prepare prospectus in connection with the floatation of mutual funds

Receive applications form the general public in respect of new issues of mutual fund

Scrutinize the applications for allotment Of Shares against applications made

Arrange for lottery if necessary for allotment

Issue allotment letter s/share certificates

Arrange refund. of excess application money

Effect transfer and registration of certificates

Issue dividend warrants to the holders of the certificates

Make correspondences with the branches of the Corporation, Bank's and Certificate holders.

3.9. Central Accounts Department.

Manages funds of the Corporation

Identify the source of fund

Preparation of salary statements, overtime Statement.

Maintaining liaison with commercial audit and external audit

Preparation of annual budget and revise it as per requirement

Preparation of Financial Statement of the corporation

Arranging call loan & term deposit

3.10.- Computer Department.

Maintaining the network systemDeveloping new softwareServicing of hardware 7 Software troubleshootingMaintaining bulk amount of dataProviding assistance to the officials for being efficient Computer use.

3.11. - Loan Appraisal Department

31

Receiving application from the entrepreneursAppraise the proposed projectSubmit the appraisal report to the board and consortium

Visit the project and make a feasibility, study on the proposed project,

3.12. - Business Development Cell

Introduce new financial productsMaintaining liaison, with SADFProvide creative ideas to diversify the business

3.13. - Project Implementation Department.

Disbursement of loan as per sanctioned Monitor the progress of the project Provide counseling, for solution of any dispute and problems, Recommend for more loan if project need thereafter

3.14. - Recovery & Follow up Department.

Measures operational performanceMeet the sponsors as the recovery would be smoothIdentifying the sick project and restructure themAssist law department in case of default

RDBMS Software

As most of the systems of ICB is data entry with high transaction rate and high MIS payload. Oracle7 was chosen as the RDBMS system.

Computerization of Branch Offices:

Oracle based customized software's are installed in the ICB branch offices. Necessary training was given to officers/stall-of, branches offices for smooth operations of the installed software.

Customized Software

Thirteen (13) - Customized software's have been developed for total automation of the operational activities of ICB.

Web page and Tele-Banking

32

ICB's own web page was launched and TTIS (Telephonic Transaction and Inquiry System) software was installed on test basis to provide better service to the investor of all levels at home and abroad.

Manpower Support

The Corporation has built up a strong technical and managerial manpower setup in its IT area. To cope with the latest development in IT, extensive training is being given to the IT personnel regularly. With all this in mind, in 1996 ICB decided to restructure and refurbish its IT infrastructure in a whole new way taking advantage of the-then modern technologies with an estimated financial involvement of Tk. 3.00 crore (approx.). Today’s ICB's computerization is the result of the above systematic planning.

33

CHAPTER FOUR

34

PERFORMANCE EVALUATION OF ICB CML

4.1. Introduction:

As a part of the restructuring programme of ICB under Capital Market Development

Programme (CMDP) initiated by the Asian Development Bank (ADB), in terms of power

conferred in the ICB ordinance three subsidiary companies, namely (i) ICB Capital

Management Ltd.(ICB CML) (ii) ICB Assets Management Company Ltd. (ICB AMCL)

(iii) ICB Securities Trading Company Ltd. (ICB STCL) have been created and made

operational to carry out merchant banking, mutual fund operations and stock brokerage

functions respectively. After the issuance of Govt. gazette notifications, ICB Capital

Management Ltd. and ICB Assets Management Company Ltd. started their functions

from 1 July 2002 and ICB Securities Trading Company Ltd. started its function from 13

August 2002. Three subsidiary companies are being operated by their own Memorandum

and Articles of Association, Companies Act, 1994, SEC’s ruleãæand regulations and

other applicable laws. The companies have independent Boards of Directors and separate

management.

The main objective of the restructuring programme of ICB under Capital Market

Development Programme (CMDP) initiated by the Asian Development Bank (ADB) was

as follows:

1. Activities relating to merchant banking, mutual fund operation and brokerage are

expected to grow fast, which in turn, may give positive impetus to the country's

capital market.

2. Companies are expected to run fully on commercials consideration to ensure highest

level of efficiency and effectiveness of their activities.

3. Subsidiaries shall commence their business afresh without taking any bad loan/ non-

performing loans; therefore, the prospects of their profitable growth are expected.

4. Employment opportunities of more professional people may be created through

operation of three subsidiaries.

5. As the subsidiaries shall run separate entities, having independent boards and

management, there should be competition among themselves for operational excellence

35

and profitability. Besides more accountability would be ensured and hiring and firing of

personnel based on their performance could be possible.

6. Efficient and expedient customer service could be possible.

As per provision of ICB ordinance (amended), from the dates the subsidiary companies

become operative, ICB ceased to undertake new business in the respective areas.

ICB Capital Management Ltd. is a fully owned subsidiary of Investment Corporation of

Bangladesh. The company obtained license from the Securities and Exchange

Commission to act as Issue Manager, Underwriter, and Portfolio Manager and to carry

out other merchant banking operations under the Securities and Exchange Commission

(Merchant Banker and Portfolio Manager) Regulations, 1996. The company was

incorporated under the Companies Act, 1994 on 5 December 2000 and obtained

registration from the Securities & Exchange Commission on 16 October 2001. The

company started its' operation from 01 July, 2002 upon issuance of gazette notification by

the government. The Company has a separate Board of Directors comprising 3 members

from the private sector having good academic qualification, expertise and experience in

the field of business, finance and investment. The Managing Director of ICB is the

Chairman of the Board. The company has excellent working environment being equipped

with logistics and computer facilities.

4.2. Background ICB CML

ICB Capital Management Ltd. a subsidiary of Investment Corporation of Bangladesh

commenced its journey on 5th December 2000 with the objective of professionally

managing merchant banking activities including issue management, underwriting and

portfolio management. The company was incorporated under the Companies Act, 1994

36

on 5 December 2000 and registration from the Securities & Exchange Commission was

obtained on 16 October 2001. The company started its' operation from 01 July, 2002 upon

issuance of gazette notification by the government.

4.3. Objectives, Vision and Mission:

To carry out merchant banking activities including issue management,

underwriting and portfolio management with a view to develop a vibrant

capital market;

To widen the scope and area of investment by mobilizing savings of small and

medium level investors Thereby generating demand for securities;

To introduce high quality companies to the Bangladesh capital market and to

support a good number of issuer companies in raising their funds from the

capital market thereby facilitating adequate supply of securities in the capital

market;

To Infuse professionalism and efficiency in portfolio management;

To establish perfect combination of high quality buy-sell execution capabilities

and create a large local network among investors and broker community.

Vision:

To provide innovative and quality services to the customers;

To introduce new products in the capital market;

To attain highest level of professionalism;

To bring total satisfaction to the clients, sponsors and employees;

To perform operations with high standard of business ethics;

To ensure optimum corporate governance principles.

Mission:

To maximize return on shareholders equity;

37

To bring about a dynamic and automated merchant banking services with the

help of latest technology;

To help develop and strengthen the capital market and thus accelerate the

pace of industrialization;

To contribute to the GDP as well as the growth of national economy;

To mobilize savings of small and medium level investors and channelize the

same to help growth of industrialization;

To create demand for and supply of securities in the capital market;

To promote itself as a leading and sound merchant banking institution.

4.4. At a glance:

Date of incorporation : 05 December, 2000

SEC's registration obtained : 16 October, 2001

Functions started : 01 July, 2002

SEC's permission obtained for branch operation : 15 July, 2003

Authorized capital : 100.00 crore

Paid-up capital : 8.00 crore

Number of shareholders : 7

4.5.Functions:

Underwriting of initial public offering of shares and debentures;

Underwriting of repeat public offering of shares, debentures and bonds;

Underwriting of right issue of shares;

Issue management;

Managing Investors’ Account;

Providing investment counsel to issuers and investors’ including financial

restructuring / engineering and corporate advisory services;

Purchase of shares and debentures including placement and equity

participation;

38

To provide consultancy services for disinvestment programs of the

Government;

To provide financial consultancy services to different companies in respect of

Equity & Entrepreneurship Fund of Bangladesh Bank and others.

Dealing in other matters related to capital market operation.

4.6. Capital Structure:

Taka in Crore

(as on 30, June, 2008)

Authorized capital : 100.00

Paid-up capital : 20.00

Long term loan : 30.09

Share money deposit : 20.00

Retained earnings : 49.70

Total : 119.79

4.7.Corporate Governance

The maintenance of effective corporate governance remains a key priority to the

Board of ICML. Recognizing the importance of it, the Board, remain committed to high

standards of corporate governance. The objectives of corporate governance are

enhancing performance, safeguarding the interest of stakeholders and promoting

market confidence. Keeping this view in mind, there are clear structure and

accountabilities supported by well understood policies and procedures to guide the

activities of Company’s responsibilities in supervision and direction of the affairs of

the Company.

The Board presently consists of 6 (six) members. Excepting Chief Executive Officer

(CEO), all the Directors are non-executive and independent, two of whom are

nominated by ICB, the holding company of ICML and the other three (50%) are drawn

from private sectors. The Board is the highest level of authority of the Company to

oversee its operation through appropriate delegation and reporting.

39

The Board has set-up a Executive Committee (EC). The members of which are chosen

from the Directors to support the Board. The 3-member Executive Committee (EC)

decides upon all routine and day to day operational matters beyond delegated power

of the Management, subject to ratification of the Board of Directors.

The Company maintains an effective and reliable accounting and management

information system. Periodical activities report that monitors actual performance

against budget are provided to the Board members.

Each year, the Board approves the annual budget of the company. The Company

holds Annual General Meeting (AGM) regularly in time. The Company is obliged to

take moral ethical and responsible decisions, safeguard the interest of all

stakeholders.

5.1. Issue Management

During FY 2007-08, ICML received 10 applications to act as Manager to the Issue amounting to Tk. 417.61 crore, details of which are given below:

a) Initial Public Offering (IPO):

Sl. No.

Name of the Company Amount of Private Placement

Size of IPO

Total Size of Issue

Agreement signing date

Status

01. First Security Bank Limited - 115.00 115.00 01.01.2008 IPO is under process.

02. Maksons Spinning Mills Limited 12.00 8.00 20.00 24.03.2008 IPO is under process.

03. Industrial and Infrastructure Development Finance Co. Ltd. (IIDFC)

- 5.00 5.00 17.04.2008 IPO is under process.

04. Standard Insurance Limited - 9.00 9.00 23.04.2008 IPO is under process.

05. Republic Insurance Company Ltd. - 9.00 9.00 23.04.2008 IPO is under process.

06. The Dacca Dyeing & Manufacturing Co. Ltd.

- 17.00 17.00 28.04.2008 IPO is under process.

Total 12.00 163.00 175.00

b) Direct Listing:

Sl. No. Name of the Company Size of Issue Agreement signing date

Status

01. Jamuna Oil Co. Ltd. 13.50 27.09.2007 Direct Listing completed.02. Meghna Petroleum Ltd. 12.00 27.09.2007 Direct Listing completed.03. Titas Gas Transmission &

Distribution Co. Ltd.214.11 30.01.2008 Direct Listing completed.

04. L P Gas Limited 3.00 05.02.2008 Direct Listing is under process.Total 242.61

5.2. Underwriting

40

During FY 2007-08, ICML received 8 applications seeking underwriting assistance of Tk 17.75 crore. Out of these proposals, 6 applications were approved by ICML. List of the companies to which underwriting commitment was made are as follows:

(Tk. in crore)Sl. No.

Name of the Company Size of IPO

Amount of Underwriting Commitment

Status

01. Industrial and Infrastructure Development Finance Co. Ltd. (IIDFC)

5.00 0.63 IPO is under process.

02. The Dacca Dyeing & Manufacturing Co. Ltd.

17.00 3.00 IPO is under process.

03. Maksons Spinning Mills Limited 8.00 1.50 IPO is under process.

04. Standard Insurance Ltd. 9.00 1.00 IPO is under process.

05. Northern General Insurance Ltd. 9.00 0.50 IPO is under process.

06. Republic Insurance Company Ltd. 9.00 0.75 IPO is under process.

Total 57.00 7.38

5.3. Private Placement:

In fiscal year 2007-2008, the company purchased shares amounting to Tk. 2.00 crore of 1 projects under Private Placement. Out of the said amount, shares amounting to Tk. 2.00 crore were purchased in company’s own portfolio. The following table shows the investment against Private placement:

(Tk. in crore)Sl. No.

Name of the Company Own Portfolio Investors’ Scheme Total

1. Maksons Spinning Mills Limited 2.00 - 2.00Total 2.00 - 2.00

The following table shows the comparative position of Issue Management and Underwriting activities of ICML since last five years :

Particulars 2007-08 2006-07 2005-06 2004-05 2003-04Cumulative as

on June 30, 2008

Issue ManagementNo. of Companies: 10 06 05 04 07 35Size of Issue (Tk..in crore) 417.61 469.00 207.31 155.68 153.50 1477.60

UnderwritingNo. of Companies: 06 11 12 11 10 62

Amount of Underwriting Commitment (Tk..in crore)

7.37 76.68 43.19 11.00 10.61 210.20

41

5.4. Investors’ Scheme

The Cornerstone of the operations of the Company was Investors Scheme during FY 2007-08 through which demand for securities are created for activating the secondary market. The scheme which was launched in 20 July ,2002 become very popular avenue of investment amongst the general investors. During FY 2007-08, the Scheme proved to be a successful medium of attracting new investors for chanalising their savings in listed securities. The year under review was favourable for the investors as manifested in the fact that the market value of the portfolio of individual investors under the Scheme were much higher than the cost price. The Investors’ Scheme of ICML was buoyant due to vibrancy in the Stock Exchanges and increase in the number of IPO/Direct listing during the year under review

During the year margin loan at 1:1 ratio was provided to the accountholders. The maximum loan limit for purchasing securities from primary and secondary markets was Tk. 25 lac. Customer service under this scheme has improved tremendously during the year under review. Purchase and sale orders were executed promptly within the same day of receiving orders from the accountholders. Financial and portfolio statements, purchase power and balance statement were provided instantly. Necessary measures have also been taken to ensure timely collection of dividends and interest from the companies.

42

The number of accounts opened, deposit received and investment made under investors’ scheme were much higher in FY-2007-08 then any of the previous year. The number of active accountholders where also increased during the year under review because of pulsation in the stock market. The volume of transactions under investors scheme also increased substantially from TK. 485.32 crore in FY 2006-07 to Tk. 1932.95 crore in FY 2007-08.

The following table shows comparative operational activities of the Investors’ Scheme:

Comparative operational activities of the Investors’ Scheme

(Tk in crore)

Particulars 2007-08 2006-07 2005-06Cumulative as

on June 30, 2008

No of accounts opened 4645 3625 1670 14140

No of accounts closed 562 177 277 1167

No. of net operative accounts

12973 8890 5483 12973

Deposits received 166.62 50.57 27.63 306.66

Loans disbursed 877.33 199.82 39.66 1147.10

Total investments 1043.95 314.59 99.47 1710.54

Net investments 149.37 33.34 10.79 256.81

Recovery of margin loan 897.49 277.48 36.09 1239.81

Comparative operational activities of Investors’ Scheme

43

It reveals from the above table and chart that in FY 2007-08, 4645 accounts were opened with deposits of Tk 166.62 crore as compared to 3625 accounts opened with deposits of Tk 50.57 crore in FY 2006-07. ICML maintained investment account through its Head office and 6 branch offices at Chittagong, Rajshahi, Khulna, Barisal, Bogra and Sylhet

The operational performance of the investors’ Scheme of Head Office and Branches has shown below:

Branch wise operational activities of Investors’ scheme

during FY 2007-08 and FY 2006-07 (Tk.in

crore)

Particulars Head office Branches Total

2007-08

2006-07 2007-08 2006-07 2007-08

2006-07

Accounts opened 1618 1309 3027 2316 4645 3625

Accounts closed 253 116 309 61 562 177

Net Accounts (Cum.)

5884 4519 7089 4371 12973 8890

Deposits received 60.64 28.67 105.98 21.90 166.62 50.57

Loans disbursed 441.40 157.07 435.93 42.75 877.33 199.82

Gross investment 502.04 185.74 541.91 128.85 1043.95 314.59

Net investment 30.88 5.74 118.49 27.60 149.37 33.34

It may be seen from the above table that, the activities of Investors’ Scheme under branch offices have increased substantially during FY 2007-08.

The total number of net accounts as on 30 June 2008 was 12973 including Chittagong, Rajshahi, Barisal Khulna Bogra and Sylhet branch. The following table shows Head office and branch wise operational performance of the Scheme in FY 2007-08:

(Tk.in crore)

Particulars Head office

Chitta Branc

h

Raj

Branch

Bar

Branch

Khu

Branch

Bog

Branch

Syl

Branch

Total

No of Accounts Opened

1618 505 1005 458 749 287 23 4645

No of Accounts Closed

253 145 64 42 54 4 - 562

Net Operative Account

5884 2677 1956 856 1294 283 23 12973

44

Deposits Received 60.64 19.91 25.73 17.10 36.56 6.66 0.02 166.62

Loans Disbursed 441.40

102.94

106.33

117.72 99.78 9.16 - 877.33

Gross Investment 502.04

122.86

132.06

134.82 136.34 15.83 - 1043.95

Net Investment 30.88 19.31 29.55 20.97 39.51 9.15 - 149.37

Margin Loan Recovery:

472.34

103.78

103.89

113.80 97.00 6.68 - 897.49

It may be seen from the table that the company had disbursed loan of Tk. 877.33 crore in FY-2007-08 as compared to Tk.199.82 crore during FY 2006-07 reflecting as increase by 339.06 percent.

The following table shows the position of sectoral investments (Gross) under Investors’ Scheme of ICML during the FY 2007-08.

Sectoral investments at cost under Investors’ Scheme (Tk in crore)

Sector Head Office

Branch Total Percentage

BANKS 223.51 241.26 464.77 44.52CEMENT 20.14 21.74 41.88 4.01CERAMICS SECTOR 0.33 0.36 0.69 0.07ENGINEERING 27.64 29.84 57.48 5.51FOOD AND ALLIED 5.28 5.70 10.98 1.05FUEL AND POWER 56.51 61.00 117.51 11.26INSURANCE 41.33 44.61 85.94 8.23INVESTMENTS 31.19 33.67 64.86 6.21IT SECTOR 6.67 7.20 13.87 1.33MISCELLANEOUS 6.89 7.44 14.33 1.37PHARMACEUTICALS AND CHEMICALS 63.02 68.02 131.04 12.55

SERVICES AND REAL ESTATE 2.91 3.14 6.05 0.58

TANERY INDUSTRIES 6.10 6.58 12.68 1.22

TEXTILE 10.52 11.36 21.88 2.10Total: 502.04 541.91 1043.95 100.00

Sectoral investments at cost under ICML Investors’ Scheme

45

Transactions of Securities

During FY 2007-08, securities valuing Tk 1932.95 crore were transacted on account of the Investors’ Scheme in the secondary market, which is Tk. 1447.63 crore i.e. 298.28 % higher than the transaction value of Tk. 485.32 crore of FY-2006-07.

Classification of Investors

Investors of different occupations invested their savings under Investors’ Scheme of ICML. However, salaried government and non-government employees, businessmen and agriculturists, housewives and working women formed the backbone of Investors’ Scheme of ICML.

The following table shows the occupation wise classification of the investment accountholders of ICML head office and branch offices who opened accounts during FY 2007-08:

Occupation Total Percentage

Govt./non-govt. employees 2284 49.17%Retired personnel 108 2.33%Engineers/Doctors/Lawyers 132 2.84%Businessmen /Agriculturists 1182 25.45%Housewives /Working women 505 10.87%Students 38 0.82%Workers 95 2.05%Others 301 6.48%

46

Total 4645 100%

Occupation wise classification of ICML investment accounts

5.6. Investment Portfolio of ICML

Investment

During the year under review, the company has played active role in portfolio management. ICML invested Tk 60.65 crore for purchase of securities from primary as well as secondary market. On the other hand securities of Tk 71.08 crore were sold. With investment of Tk. 15.16 crore during FY 2006-07 the cumulative investment upto 30 June 2008 stood at Tk 47.06 crore.

The following table shows comparative summarized position of investment portfolio and dividend income of ICML in FY-2007-08 and FY 2006-07 and 2005-06:

(Tk. in crore)

Particulars 2007-08 2006-07 2005-06 Cumulative as on 30 June 2008

Total Investment 60.65 15.16 10.61 117.40

Total Sale 71.08 20.62 5.54 116.43

Net investment as on closing of June

47.06 28.29 27.19 47.06

Market price of Investment as on closing of June.

57.88 40.57 27.11 57.88

Capital Gain 29.12 6.55 2.37 45.46

47

Dividend Income 1.44 1.65 0.88 4.81

Comparative summarized position of investment portfolio of

ICML in FY-2007-08, FY-2006-07, FY -2005-06

Dividend Earned

The Company had earned dividend of Tk 1.44 crore from 2534941 securities during the year under review, compare to the dividend of Tk 1.65 crore in the previous FY 2006-07. Details of dividend income during FY 2007-08 are shown in Annexure-F.

Capital gain

During FY 2007-08, the Company had earned capital gains of Tk. 29.12 crore by selling 2927485 securities of 144 companies. A list of capital gain on sale of Investment as on 30 June 2008 is shown in Annexure-E.

Bonus share received

During the FY-2007-08, the Company had received 75817 Bonus shares against holding of 470661 shares. Details of company wise rate and date of declaration of Bonus shares and no. of bonus shares receivable/received against the holding of the securities of 44 Companies during the FY-2007-08 is shown in Annexure-G.

5.7. OTHER ACTIVITIES

Consultancy services

48

The company is providing consultancy services to the sponsors of the Equity & Entrepreneurship Fund (EEF) of the Bangladesh Bank including financial engineering and other financial advisory services. The consultancy services mainly include preparation of appraisal report/feasibility report of different companies that intends to receive the assistance of Equity and Entrepreneurship Fund of Bangladesh Bank and others.

Opening of Fifth & Sixth Branch

ICB Capital management Ltd. Opened its Fifth branch at Bogra on 15 May 2008 & Sixth branch at Shlhet on 22 may 2008 respectively. For further acceleration of the business, the Seventh branch of the Company is expected to be opened at Uttara very soon.

5.8. PERFORMANCE EVALUATION ON FINANCIAL RESULTS5.8.1. Income performance

During the period under review, the company earned total income of Tk 53.84 crore which includes Tk.15.86 crore in the form of interest (29.46% of total income) followed by Tk. 29.12 crore as profit from sale of securities ( 54.09% of total income) and Tk.7.13 crore as income from fees and commission ( 13.24% of total income). Besides, the company also earned Tk. 1.44 crore as dividend income ( 2.67% of total income) and Tk. 0.29 crore as other income (.54% of total income).

5.8.2. Expenditure and provision

The total expenses incurred in FY 2007-08 was Tk 12.88 crore. The expenses on account of interest was Tk. 8.46 crore (65.68% of total expenditure) followed by Tk. 1.44 crore in respect of salaries and allowances and Tk.1.25 crore in respect of other operating expenses and Tk. .24 crore on account of rent, taxes, insurance, lighting etc. The company maintained provision of Tk. 0.70 crore against investment in securities. Besides this, Tk.1.37 crore has been made as provision against margin loan. In addition, tax @ 37.50% amounting to Tk.4.19 has also been provided for.

5.8.3. Earnings and Dividend

Before provision for income tax & others the company earned profit of Tk. 40.96 crore while the net income of the company after provisioning stood at Tk. 34.70 crore. With the addition of last year’s retained earnings of Tk. 14.95 crore, the distributable income stood at Tk. 49.70 crore. The Board of Directors pleased to recommend dividend at the rate of Tk. 16.00 per share for FY2007-08.

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Summary of the financial results (Tk in crore)

Particulars 2007-08 2006-07 2005-06 2004-05Cumulative as on June 2008

Income 53.84 17.76 10.52 12.78 99.98

Expenditure 12.88 7.62 6.20 4.86 34.01

Income before provision

40.96 10.154.32

7.9265.98

Provision 2.07 0.32 0.68 1.87 5.01

Income before tax 38.89 9.83 3.63 6.06 60.88

Tax provision 4.19 1.03 0.56 0.61 6.70

Income after tax 34.70 8.80 3.08 5.45 54.18

Retained earnings 49.70 16.23 8.63 6.76 74.56

Dividend amount 3.20 1.28 1.20 1.20 7.68

Retained earnings after dividend

46.50 14.95 7.43 5.56 46.50

5.8.4. Some Key Financial Ratios

Particulars 2007-08 2006-07 2005-06 2004-05

Net Profit to Total Income (%) 64.45 49.55 28.99 58.00

Return on Total Investment (%) 14.92 8.69 4.76 10.47

Return on Equity (%) 49.78 36.31 18.49 36.92

Earning Per share (Tk.) 417.57 202.90 107.92 84.47

Book Value per share (Tk.) 585.61 302.90 207.92 184.47

Cash Dividend per share (Tk.) 16.00 16.00 15.00 15.00

Dividend payout Ratio (%) 5.49 15.55 39.01 17.78

Debt-Equity Ratio 43:57 2051 43.57 36:64

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5.9. Manpower:

During FY 2007-08,6 officers and 4 non officer employees were recruited. As a result the total work force as 30 June 2008 stood at 58, out of which 34 where officers and 24 were non-officer employees. In addition, 12 officers including the CEO and DCEO were working in the Company on deputation from ICB. Besides this sub-staffs were also working in the company on casual basis. The number of female employees as on 30 June 2008 where 9, representing 15.52 percent of the total manpower strength.

5.10. Financial and Operational Highlights

(Tk.in crore)

Sl.No Particulars 2007-08 2006-07

2005-06

01. Total Income 53.84 17.76 10.51

02. Net Income 34.70 8.80 3.07

03. Earning per share (based on retained earnings) (Tk.)

417.57 202.90 107.90

04. Earning per share (based on net income) (Tk.)

291.59 110.00 38.43

05. Return on Equity (percentage)

49.78 24.29 18.49

06. Book Value per share (Tk.) 585.61 302.90 207.92

07 No. of Accounts opened 4645 3625 1670

08. Deposits received 166.62 50.57 27.63

09. Loans disbursed 877.33 199.82 39.66

10. Net Investment 149.37 33.34 10.79

11. Recovery of margin loans 897.49 277.48 39.25

12. Investment in ICML’s portfolio

60.65 15.16 10.61

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13. Capital gains 29.12 6.55 2.37

14. Dividend per share 10.00,1:4(B)

16.00 15.00

15. Total Shareholders Equity 69.70 24.23 16.63

16. Total Assets 232.58 101.27 64.56

17. Manager to the Issue:

No. of companies 9 6 5

Amount 257.50 469.00 207.31

18. Underwriting:

5.11. SWOT Analysis

SWOT is an acronym for an organization’s strengths, weaknesses, opportunities and

threats. The underlying assumption of a SWOT analysis is that managers can better

formulate a successful strategy after they have carefully reviewed the organization’s

strengths and weaknesses in the light of the threats and opportunities presented by the

environments. A right strategy can turn fledging organization into a successful one,

whereas a wrong strategy could lead to disasters. SWOT analysis emphasizes that

organizational strategies must result in a good fit between the organization’s internal and

external environments

SWOT analysis factors:

Managers should consider several factors when assessing an organization’s SWOT

analysis presented by extensive competitive environments. Once the strengths,

weaknesses, opportunities and threats have been identified, the management team is then

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in a position to complete the SWOT analysis by drawing conclusions about the

attractiveness or unattractiveness of the organization’s current situation and the need for

strategic action.

As the researcher is engaged to identify the current position of ICML in the competitive

market, it is very necessary to have the SWOT analysis to identify the strengths,

weaknesses, opportunities and threats of ICML. This is one of the popular ways, by

which one get take necessary action to improve their business because SWOT analysis is

completely depend on the market. In this report the researcher has also performed SWOT

analysis in favor of ICML based on the information gained from current market situation.

SWOT analysis

STRENTH

o The bank has goodwill in the marketo Strong professionally qualified team of expertso Corporate responsibilityo Strong and lasting business relations with customers, partners and vendorso Employment creation for the youtho Committed workerso Address the Low Incomeo Can be a good model for the private real estate development in the provision of

affordable houseso Can initiate, influence professionals and decision makers as well

OPPORTUNITY

o Peoples support to the projecto High potential to develop the old city centreo Ministry welcomes new ideaso Commitment from the Government sideo Colleagues are aware of the problem

WEAKNESSES

o Absorption in routine work at the officeo Complacencyo Lack of patent protectiono Lack project management skill, cost effectiveness in construction

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CHAPTER-6FINDINGS

o Lack of awareness in participatory planning approacho Not enough Research and Developmento Lack of competition

THREATS

o Shortage of basic infrastructures for large scale housing schemeo Officials can decide to keep working on the same mannero Vacant land exhausted in the city centreo Political instabilityo Increase Material rateo Lack of Government rules & Regulation

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I have already mentioned that the ICB Capital Management Ltd. is very much important subsidiaries Company of ICB. So if this company can run successfully it may give great contribution to develop the organization. As per my concern, I observed there are some limitations in the company and some of them relate to ICB’s own institutional weakness and some of them relate to the companies own management. The findings are as follow:

Although ICB CML is fully separate companies but always time its depends on ICB’s top level management.

Lack of proper updated technology. This is the age of information technology (IT) all the activities are electrolyzed and computerized. Computer or other electronic device work very quickly than the manual procedure so it is a problem also.

Lack of skilled and professional expertise.

Most of the employees are old of this company. But young person can work with young power, skill and inspiration.

Training all the employees should be upgraded with latest technological development with the changing edge.

Lack of business experience of the company.

Lack of co-ordination among various financial institutions in exchange of information.

Inadequate attention too social cost and benefits.

Lack of co-ordination among the various department.

Lack of motivation and team speed.

Lack of proper allocation of Human Resource.

Lack of morality and moral teaching.

There is greater influence of ICB on ICB AMCL.

Chairman and Chief Executive Officer of ICB CML come from ICB on deputation, which

is not better for the internal work environment of ICB CML.

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Dividend from investment in different companies is one of the sources of income for the

own portfolio. But many companies in Bangladesh don’t declare dividend year after year

which creates problems in ICB CML to give dividend to the shareholders.

.

Withdrawal of any funds is very lengthy and complicated process and inefficiently

managed.

Floor space is not sufficient in ICB CML. Many employees work in a big room. As a

result it creates noise.

There is lack of publicity about ICB CML.

ICML take initial deposit for opening investor's account so students are not interested to

open investor's account here.

Reserve policy of ICB CML is not so attractive.

CHAPTER-7RECOMANDATION

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1. The ICB Capital Management Ltd. (ICB CML) should be created independent management team.

2. The Companies should have a training institute.

3. The Company should recruit young and energetic persons.

4. The responsibility of the officers / Staff to after safe keeping securities ledgers records, documents, paper of share department should be eliminated. Therefore, it must have computerized.

5. In case of portfolio section the fund management should include that company’s share. Which performance is well?

6. For project appraisal purpose ICB CML depends mainly on the appraisal report of the financier i.e. BSB/BSRS etc. They should scrutinize research and investigate the real future of the company.

7. ICB CML becomes very much selective for the matter of providing loan. As a result the number projects receiving ICB CML assistance decreases gradually in relation to the previous years.

8. ICB CML should prepare prospectus and other booklet to inform customer about

the company and their performance.

9. ICB CML have to be free from all kinds of political and government unfair

influence.

10. Withdrawal of any funds should be easy and less time consuming.

11. Floor space of CML should be increased.

12.The Companies should take steps to increase the awareness of people to mobilize

the savings of the small investors through different media.

13.Initial deposit for opening investor's account of ICML should be removed.

14.Reserve policy of ICB CML should be revised for increasing the confidence of the account holders.

CHAPTER-8 CONCLUSION

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ICB Capital management Ltd. (ICML) has played a pioneering role in the development of capital market. During FY 2007-08, ICML received 10 applications to act as Manager to the Issue amounting to Tk. 417.61 crore. ICML continued to command the confidence and attraction of investors.

ICML has achieved confidence of a large number of investors by maintaining their investors account appropriately. Market value of the portfolio, Cost of portfolio, Net Asset Value (NAV), Net distributable income/EPS, Dividend, Price-Earning Ratios, has shown not excellent but satisfactory performance.

To conclude this report it can be said that it was a great opportunity for me to study the operational activities of the investment bank as well as inerchant and the capital market of the country.

The investment corporation of Bangladesh (ICB) is virtually the only investment bank in Bangladesh. In a broader sense ICB is both Investment Bank and Development Financial Institution (DFI).

ICB plays a vital role to encourage and broaden the base of investment and thereby to help develop the capital market in Bangladesh.

My main focus on this report is performance evaluation of ICB Capital Management Ltd. From the analysis it found that the Companies’ position is good. There is low risk involvement. The main reason behind this there was no binding in size.

The study is the first time for me to get the opportunity for conducting such and elaborate study in a different field. Hence, I do not know how far I am successful in writing this report. But it is true; I have tried sincerely to discharge my duties with Zeal & enthusiasm and to the best of satisfaction. However, I remain apologize for any error or omission which may happen unwillingly.

ICML played very valuable and extended roles to accelerate the pace of industrialization

and to foster and widen a vibrant and sustainable capital market in the country. The

company performed the activities related to the growth of merchant banking functions,

very excellently. The operational performance of all the company showed further

impressive growth opportunities.

ICML give utmost efforts to improve management capabilities instilled a strong sense of

professionalism in efficient management of different portfolio. The company has taken

steps to make the company vigorous for sustainable growth. Company is now posing to

play a vital and extended role in the industry.

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ICML also make a strong position in the security market. The overall performance and

achievement is remarkable. So the subsidiary of ICB is playing vital role to develop and

strengthen the capital market.

I have already mentioned that there was some objective of the restructuring programme of

ICB under Capital Market Development Programme (CMDP) initiated by the Asian

Development Bank (ADB). Now my justification is that ICML has achieved some

objective. These are as follows:

1. ICML as a merchant banking has grown fast, which in turn, may give positive

impetus to the country's capital market.

2. ICML runs fully on commercials consideration to ensure highest level of efficiency

and effectiveness of their activities.

3. ICML has commenced its business afresh without taking any bad loan/ non-

performing loans; therefore, the prospects of its profitable and growth is expected.

4. Employment opportunities of more professional people has created through

operation of three subsidiaries.

5. Subsidiaries have run as separate entities, having independent boards and

management,

6. Subsidiaries serve Efficient and expedient customer service.

Bibliography

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1. ICB, Annual Report, 2006-07, 2005-06, 2004-2005.

2. ICB CML, Annual Report, 2006-07, 2005-06, 2004-05, 2003-04.

3. A. S. Imdadul Haque “The Role of ICB in the Development of Capital Market in

Bangladesh”.

4. Sharpe, W.F. (1978), Investments (Englewood Cliffs), New Jersey: Prentice-Hall,

Inc).

5. Ordinance and General Regulations of ICB.

6. Various journals kept in the ICB library.

7. Conversation with Various Departmental Heads.

8. Bangladesh Gazette.

9. Marketing Research - Noresh K. Malhotra.

10. Business Communication - Lasiker & Pettit.

11. www.icb.gov.bd

12.www.icbcml.com.bd

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