ICB and its subsidiary companies play very vital roles to accelerate the pace of industrialization

CHAPTER: 1

INTRODUCTION

1.1 Role of Capital Market in Bangladesh Economy

A financial market has two wings: money market and capital market. Money market deals with shorter fund (which is generally not exceeding one year duration) and the capital market deals with long-term funds (more than one year duration). Again a financial market can be segregated into two segments: (a) Security segment and (b) Non- security segment. Security segment means security market, which is widely known as capital market. Capital or security market deals with long-term securities like shares, debentures, etc. The capital market is not one institution but a number of institutions through which supply and demand for long-term capital is routed and regulated, for example, Stock Exchange, Banks, insurance companies, the investment banks etc. A security or capital market is composed of two parts (i) Primary market and (ii) Secondary market. Primary market deals with new issues and the secondary market deals with existing issues. Recognizing the importance of capital market Rahman says, “An efficient capital market could be the proper vehicle in mobilizing domestic savings and translate thought of as an alternative to existing conventional (cash) mode of finance which not only deconcentrates ownership base but also increases accountability and performance of the finance using companies.”

Through participation in both the primary and secondary markets, ICB and its subsidiary companies play very vital roles to accelerate the pace of industrialization and to develop a vibrant and sustainable capital market in the country. So, if want to make any kind of discussion on the development of capital market in Bangladesh, our focus should be thrown on the operation of Descend ICB.

1.2 ICB as an Investment Bank in Bangladesh

With a view to encourage broaden the base of investment, develop the capital market and mobilize savings, ICB stated its functioning on the 1^st October 1976 under the ICB ordinance No. XL of 1976. As an investment bank, ICB has been offering merchandising and financial assistance operations for the last two decades. In its merchandising operation Investors’ Scheme, Mutual Fund, Unit Fund, and Direct Investment in purchasing shares and operating on DSE and CSE are important ones. Financial assistance operation includes underwriting, bridge financing and direct investment in shares and debentures.

To develop primary market needs a well-developed secondary market. The secondary market is required to have first time issued securities. In the secondary market, securities are usually traded among investors and between investors and dealers.

Investment bank performs several important functions in an economy, most important of which are merchant banking, investment management etc. Customers can also get advice and suggestions from investment bank for making investment decisions. Investment bank also manages institutional fund, mutual fund (both closed-end and open-end), and money market fund including venture capital management. This is the only institution, which offers many of the above services.

1.3 Objective of the Study

Investment depends on the efficient allocation of the resources. To make this, it is necessary to establish a way to collect and disburse the resource. At the same time there should be an opportunity for the entrepreneurs to invest. ICB’s investors’ scheme is doing this. They are now providing margin loan, professional counseling, secured custodian services, modern logistic support and computer facilities and excellence working environment facilities. By doing they play a vital role in the capital market and the industrialization of the country. This activates make me interested to work on the investment scheme. So the objectives of the study are:

· Analysis the activities of investment scheme.

· To interpret the importance of the investment scheme in respect to the country’s capital accumulation.

· To present information, fact about the role of ICB Capital Asset Management Company ,Rajshahi Branch as well as the total activities

1.4 Justification of the Study

For the development of the country, an efficient capital market is necessary. An investment bank is necessary is for this. Financial assistance operation by a way of underwriting and bride financing facilities are initiated by ICB.

Industrial development of a country depends on the long term loan. Naturally banking sectors provides the short term loan. With the help of this sector, a country’s industrial side can’t be developed.So an efficient financial market is necessary. To make an efficient market ICB is working for the long time.By using their investors’ scheme, they collect money from the idle sectors to the industrial sectors. They allocate resources efficiently. These activities make me interested to work on it.

1.5 Plan of the Study

This report has five chapters including this introductory chapter. This chapter explains the role of capital market in Bangladesh, activates of ICB as an investment bank .Justification of this study is described here.

Chapter 2 deals with the location, structure and the activities of the ICB Rajshahi Branch. This chapter also includes the accounting system.

In chapter 3 history, objectives, policies, organizational structure, functions different growth trends are presented.

Chapter 4 deals with the opening and maintaining of investors’ account through investors’ scheme. Under this heading, history, objectives, features, regulation to open a form, sample of a form ,classification of investors based on income ,loan recovery performance from both ICB perspective and the ICB Capital Asset Management limited perspective.

Final chapter 5 represents the summery of findings, policy recommendation and conclusion. This chapter also included some suggestion for the betterment of the Corporation.

Chapter – 2

Overview of ICB Rajshahi Branch

2.1 Location of the Branch:

Shaheb Bazaar, heart of the city and busiest place in Rajshahi where the Branch is situated. This branch was established on 15 February 1984 in Rajshahi. It is located at Gaffar plaza (2^nd Floor) in Rajshahi. This branch serves the Shaheb Bazaar area and also the whole city through its various customer services.

2.2 Current Organogram of this Branch

2.3 Human Resources Management

Human Resource Management (HRM) is one of the most crucial divisions in ICB. It brings speed in all the works of the Corporation. Human resource planning decision is taken by personnel department through head office. There is no particular Human Resource division in this branch.

Name of the management personnel are as follows:

Md.Raficul Islam Manager/ Senior Principal Officer

Mrs. Sultana Begum Principal Officer

Mr. Abdul Mottalib Principal Officer

Md. Kamrul Hassan Assistant Programmer

Md.Rajjakul Islam Supervisor

Mr. Sk. Rafiqul Islam Data Entry Operator

Md.Ershadunnabi Sarker Steno Typist/PA

2.4 Subsidiary Activities

2.4.1 ICB Capital Management Ltd. (ICML)

To accelerate the activities of the capital market government take some restructuring policy. As a part of restructuring program of ICB under Capital Development Program (CMDP) initiated by the Government of Bangladesh and the Asian Development Bank(ADB),ICB Capital Management has been created as a subsidiary of ICB to carry out merchant banking activities including issue management, underwriting and portfolio management. The Company was incorporated under the Companies Act, 1994 on 5 December, 2000 and registration from the Securities and 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.

ICB Capital Management Ltd. has started its activities from 16 June 2005.It is providing better services day by day. No of account is increasing in a tremendous rate.

2.4.2 ICB Asset Management Company Ltd. (ICB AMCL)

Under the restructuring program, ICB AMCL was created in 5^th December, 2000 and commenced its business in July 1; 2002.The vision of the company is to play a dominant role in developing Mutual Fund industry as the preferred tool of investment in the country. Meanwhile, the company has emerged as one of the fast expanding asset management company in the country. It is started working at Rajshahi in 16^th July 2005.

2.4.3 ICB Securities Trading Company Ltd. (ISTCL)

ICB Securities Trading Company Ltd. is also made under the restructuring program. The company obtained license from the Securities and Exchange Commission on 13 August 2002 and started its brokerage activities with the Dhaka Stock Exchange (DSE) from 13 August 2002 and Chittagong Stock Exchange (CSE) from 17 August 2002. Its main objective is to facilitate online trading, to ensure better, fraud less and quick services to the customers. ICB Securities Trading Company Limited has started its journey in Rajshahi from 16 June 2005. From then it is operating its activities in a better way. This branch is closely linked with the CSE. Recently it got linked with DSE.

2.5 Computer Division

The most important division is Computer division of ICB Rajshahi Branch. Though the division has been established recently, it has brought speed in all the works of this branch. It reduces paper jobs and also saves the time. For example, to check the balance of an account holder, Investors department need not go the account department but can do the job by using the workstation of the department. A strong networking environment exists among the different department of ICB that is mainly controlled by computer division. The main purpose of computer division is to maintain the existing networking environment of ICB and generate some application for different departments in order to fulfill the total automation planning by the Investment Corporation Bangladesh.

Computer division includes three departments

1. Data Management

2. System Analysis

3. Programming

ICB has developed a set of software to conduct and support its main business and management operations, mutual funds management system, stock exchange index publication IPO management, unit sales and repurchase management system, personnel management information system, the software merchandising operation management system, accounting application, mutual fund reconciliation, share reconciliation etc.

2.6 Operational Activities

ICB, Rajshahi Branch operates its activities getting direct instructions and supervision of the head office. The head office formulates all policies and regulations and these are implemented through its branches including this branch. This branch does not provide for underwriting, bridge financing, and other such activities for the development of industries. The sector in which the head office gives loan is supervised by the branch office. The branch also provides the following functions

· To participate in the primary market transactions directly.

· Maintaining different types of voucher.

· To participate in the secondary market by ICB Securities Trading Co. Ltd. Rajshahi Branch

· Investment Account Management

· Unit Fund Management

· Mutual Fund Management

· Legal Action

· Consumer Credit Scheme

· Custodian and Banker to the issues

· Corporate Financial Advice

Chapter – 3

A Review and Analysis of Growth Trend of the Activities of ICB

3.1 Preamble and Origin of ICB

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 increasing 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 under ICB. Now the institution can play a more dynamic role in the development of the capital market of Bangladesh.

3.2 Objectives of ICB

ø Promoting and establishing subsidiaries for business development

ø Mobilizing savings

ø Developing the capital market

ø Providing for matters ancillary thereto.

ø Encouraging and broadening the base of investments.

3.3 Business Policy of ICB

· Inspiring small and medium savers for investment in securities

· Diversifying investments

· Arranging equity and loans singly or through consortium of financial institutions including banks.

· Creating employment opportunities.

· Providing financial assistance to projects subject to their economic and commercial viability.

· Acting on commercial consideration with due regard to the interest of industry, commerce, depositors, and investors and to the public in general.

· Encouraging more on investment in Agro-based and Information and communication (ICT) sectors.

· Developing and encouraging entrepreneurs.

3.4 Functions of ICB

· Managing existing Investment Accounts.

· To participate in and finance of joint-venture projects.

· Purchasing shares and debentures including placement and equity participation directly.

· To provide lease finance singly or by forming syndicate.

· Acting as Trustee and Custodian.

· Managing Portfolios of existing business

· To provide Bank Guarantee

· Managing existing mutual funds and unit fund.

· To conduct Computer Training Programs.

· To provide Consumer Credit.

· To provide investment counseling to investors.

· To supervise and control the activities of the subsidiary companies.

· To participate in Government Divestment Program.

· To deal in other matters related to capital market operations.

· To provide advance against ICB Unit and Mutual Fund Certificate.

3.4.1 Growth of Different Investment Schemes

Since its establishment, ICB launched Investors’ Scheme first in 1977 and then it become successful in introducing eight mutual funds and one unit fund during the last two decades. Table shows the trend of introduction of different schemes.

Table 1

Attainments of ICB

Type of Attainment	Date of Establishment/Commencement
ICB	October 1 ,1976
Investors’ Scheme	June 13,1977
1st ICB Mutual Fund	April 25,1980
ICB Unit Fund	April 10,1981
2nd ICB Mutual Fund	June 17,1984
3rd ICB Mutual Fund	May 19,1985
4th ICB Mutual Fund	June 06,1986
5th ICB Mutual Fund	June 08,1987
6th ICB Mutual Fund	May 16,1988
7th ICB Mutual Fund	June 30,1995
8th ICB Mutual Fund	July 23,1996

Over the year, the investor’ scheme has grown tremendously. Table 1 shows that after establishment, ICB floated eight closed-ends and one open-end fund between April 25, 1980 and July 23, 1996. Since ICB got significant responses from the public, that’s why it was possible on the part of ICB to float eight mutual funds and one unit fund within 16 years of its operation. Mutual funds are very popular to the investors because of satisfactory dividend payment performance; and side by side because of the capital gains. As on 30 June, 2005 there were 31,372 mutual fund certificate holders. Not only that the total number of unit holders as on 30 June 2005 were 40354525.

Other products of ICB

Without above product, ICB has some other products. Those are given below :

Consumer Credit Scheme

As part of business diversification programmed ICB has introduced “Consumer Credit Scheme” in 2003-04 looking at the need of various household commodities of different professional of govt., semi-govt., autonomous bodies and some established private sector organizations. Under this scheme one can enjoy minimum of TK. 1.0 lac but maximum of TK. 5.0 lac credit facilities. The rate of interest on the loan is reasonable competitive. Under this scheme the cumulative amount of loan disbursed up to 30 June 2005 was TK. 1.28 crore including TK. 1.0 crore during the year under review.(Annual Report 2004-05)

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, and 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. In 2004-05, ICB sanctioned lease assistance to 2 projects involving TK. 50.55 crore. In previous year, 7 projects involving TK.11.21 crore were sanctioned. As on 30 June 2005, cumulative disbursement against this scheme stood at TK. 22.62 crore.(Annual Report 2004-05)

Bank Guarantee Scheme

ICB introduced Bank Guarantee Scheme in 2002-2003. ICB provides ( I ) Bid Bond for enabling the business people to participant in any tender or bidding; ( II ) Performance Bond for helping the business community to continue their business smoothly by fulfilling their obligations promised by them to their clients; and ( III ) Customers Guarantee for solving different disagreements between customers authority and the business classes at the initial stage. The maximum limit of guarantee is TK. 2.0 crore and would be issued against at least 20 percent cash and 80 percent easily encashable securities or against 100 percent cash margin. Re-guarantee from other financial institution is required for guarantee against the amount exceeding TK. 2.0 crore.(Annual Report 2004-05)

Advance against ICB Unit certificate scheme

Advance against ICB unit certificate scheme was introduced in 1998, especially designed for the ICB unit holders to meet their emergency fund requirements. 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 rate of interest on the loan is reasonable and competitive.

Advance against ICB 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 percent value of last one year’s weighted average market price of certificates at the time of borrowing by depositing his/ her certificates under lien arrangement from any of the ICB offices. The rate of interest on the loan is reasonable and also competitive.

An amount of TK. 4.66 crore was disbursed under these schemes in 2004-05 which was TK. 3.89 crore in the previous year registering an increase of 19.79 percent. As on 30 June 2005, the cumulative disbursement was TK. 22.0 crore. The net balance of outstanding advance on that date stood at TK. 4.05 crore. During the year under review, the total recovery under this scheme was TK. 3.90 crore. (Annual Report 2004-05)

3.4.2 Growth Trends of Accounts and Deposits

Investment banking system is very much related to deposit mobilization. If the corporation invests to expand the leading activities as much as possible deposits from the ideal savers of the society are expected to be accumulated. Now, let us see to what extent ICB was able to accumulate funds and at the same time we have to look upon the performance of ICB Capital Management Ltd.(ICML).Because it is now operating the investor’s scheme and we are reporting on this scheme’s .ICB has stopped opening of new investment account since 1 July2002,ICML a subsidiary of ICB has undertaken the function of opening and managing of new investment account. How ever, ICB continues to manage its existing accounts to fulfill its fiduciary obligation to the accounts holders. So the current deposit position of the ICB and ICML should be described.

Table No.2

Position of Net Account of Investor’s Scheme of ICB

Year	Head Office	Rajshahi Branch	Others Branch	Total	Increase/ Decrease of ICB in (%)	Increase/ Decrease of Raj.B in (%)
2002-03	26814	3999	19648	50461	…….	…..
2003-04	26440	3977	19270	49687	-1.53	-0.55
2004-05	26152	3753	18975	48880	-1.62	-5.63

Source. Annual Report 2003-04, 2004-05

From the table we get that growth rate is negative because of non-continuing of Investors’ Scheme.

Table No.3

Position of Deposit of Investors’ Scheme of ICB

(Taka in Crore)

Year	Head office	Rajshahi Branch	Others Branch	Total	Total Growth in (%)	Raj.B. Growth in (%)
2002-03	5.30	1.23	7.38	13.91	……..	…….
2003-04	10.69	2.34	14.28	27.31	96.33	90.24
2004-05	9.68	2.74	10.35	22.77	-16.62	17.09

Though the no. of account is going to reduce so the growth rate of deposit is negative. Now we will focus on the ICML’s performance:

Table-4

Growth Trends of Accounts and Deposit of ICML in Bangladesh

Particulars	2004-05	2003-04	Growth in(%) in crore
No. of Investment Accounts Opened	3405	536	535.26
Deposit Received	41.58	17.38	139.24

Source; ICML annul report 2004-05

From the above table we got that both the account and deposit growth rate is so high because this subsidiary is a specialized firm to serve this purpose. At the same time it’s a newly open company so investors are eager to open account in

this. That’s why these rates are so high. The growth performance of Rajshahi Branch is given below:

Table No.5

Deposit and Account of ICML, Rajshahi Branch

(Taka in Lac.)

Particular	Up to 28th June,.2006	2004-05
Net Operating Accounts	483	18
Deposit Received	155.55	15.33

Source. Rajshahi Branch

3.4.3 Loan Recovery Performance of ICB

To make the market’s function sound and smooth greatly depends upon the recovery of its dues in time. Without timely recovery, no financial institution can run smoothly and successfully. Financial assistance operations is one of the major functions of I.CB.It provides bridging loan and debenture loan to projects which is economically and socially feasible. Now let us see to what extent ICB has been able to achieve these broad objectives.

Table-6

Loan Recovery Position of ICB

(Taka in Crore)

Year	Head Office	Rajshahi Branch	Other Branch	Total	Total growth in (%)	Raj.B. growth in (%)
2002-03	21.95	1.33	17.09	40.37	……..	……..
2003-04	70.53	3.76	28.85	103.14	155.48	182.71
2004-05	73.46	20.35	85.79	179.60	74.13	441.22

Source. Annual Report 2003-04, 2004-05

Table -5 shows the past performance of recovery against the over due loans. In this section their performance is quite satisfactory.

Table No.7

Loan Recovery Position of ICML

(Taka in Crore)

Year	Recovery	Growth in Percentage
2003-04	12.56	……….
2004-05	16.19	28.90

Source. ICML Annual Report 2004-05

As a new company its performance is quite attractive and efficient.

3.4.4 Rebate Benefits Activities in Investment Account:

Table No 8

(Taka in Lac)

SL. No.	Particulars	Financial Year 2003-04	Financial Year 2004-05	Cumulative Up to 30 June, 2005
1.	Application received:
	No. of investment account	769	59	1588
	Amount of down payment	71.35	9.84	95.17
	Amount rebate payable	208.43	27.07	284.11
	Amount payment for effective rebate	72.69	9.84	158.70
	Interest during the period of rebate	37.79	36.91	84.81
2.	Effective rebate benefits:
	No. of investment account	727	59	1458
	Amount of rebate benefits paid	204.84	27.07	275.24
	Total amount received with down payment	71.35	9.84	162.50

Source: ICB Rajshahi Branch

To rehabilitate the badly affected the investment account due to share market crush in 1996 and it’s after match effect, interest waiver facilities were extended during the reporting year. A significant no. of investors enjoyed the facilities .A total waiver of interest of Tk.19.06 crore was allowed to investment accounts in 2004-05.

CHAPTER-4

Opening and Maintaining of Investors’ Account through Investors’

Scheme

4.1 Introduction

The investor’s scheme was launched in 1977 with the objective of broadening the base of equity investment through mobilizing savings of small and medium savers for investment

In the securities market. Over the years, this scheme has grown tremendously. ICB , at its discretion , may grant up to two times loan against the assets of an account subject to a

Maximum limit of TK.3.0 lac. An accountholder may use the combined balance of his/her equities and ICB loan to buy shares/ securities. To help the investors to develop diversified and balanced portfolio to minimize risk and earn a reasonable return, ICB provides professional advice and other support services.

The investors’ scheme attracted investors of different professions. However, public and private sector employees and housewives had shown much interest in the scheme.

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. In view of strategic changes in policy reform, ICB has stopped opening of new investment account since 1 July 2002 ICB Capital Management Ltd. – a subsidiary of ICB has undertaken the function of opening and managing of new investment account. However, ICB continues to manage its existing accounts only to fulfill its fiduciary obligations to the account holders.

To provide efficient and quick service, Merchandising Operation Management software has been installed under the computerization program of the scheme. Consequently, Telephonic Transaction and Inquiry System (TTIS) software has been installed to facilitate operation and supply of information of investment accounts to the investor over

telephone. To rehabilitate the badly affected investment accounts due to share market crash in 1996 and its aftershock, interest waiver facilities were extended to investors in 2004-05. A significant number of investors enjoyed the facilities. Waiver of interest totaling TK. 19.06 crore was allowed to investment accounts in 2004-05. Up to 30 June 2005 a total amount of interest waived and rebate allowed in the investment accounts stood at TK. 55.52 crore. Anew scheme has also been offered this year to rehabilitate the very badly affected investment accounts.

Securities worth TK.263.91 crore were transacted in the Investor’ Scheme during 2004-05. Out of total transaction, securities of TK. 247.32 crore were transacted in the secondary market and TK.16.59 crore were invested in the primary market.

4.2 Objectives of the Scheme

ICB Investors’ Scheme was introduced with a view to helping the small and medium types of investors and for mobilizing savings through investment. An investment account

Holder can get attractive returns on investment in financial sound companies’ shares, in the form of dividend, bonus, right shares etc. Investor can also get institutional support for purchasing and selling of shares through this account. The objectives of Investor Scheme are recapitulated as:

· To mobilize savings from small and medium investors for investing in the capital market for accelerating economic development of the country;

· To grow savings habits among small and medium savers for making investment in the productive avenues;

· To encourage the investor for purchasing shares and debentures; and

· To create demand for the securities in the capital market of Bangladesh.

4.3 Main features of investor’ scheme

The main features of the investor’ scheme are:

· An investor should open an account with a minimum deposit of TK.10000 ;

· Provision of loan is made for the account holder with 50 percent margin with a maximum

· Of TK.3 lac ;

· All funds are required to be investment in shares, stocks, debentures and securities only and ;

· For purchase and sale of securities in the secondary market and only 0.5 percent commission is charged as service charge.

4.4 Operations of the scheme

ICB introduced this scheme with a view to encourage and broaden the base of investment

Develop the capital market and mobilize savings. This scheme has created a new horizon

Of investment for varies types of investors with the stock exchanges. Operation of investors’ scheme can be divided into the following categories:

· Opening an investment account;

· Loan facilities for the account holders;

· Purchase and sales of securities;

· Withdrawals of funds and securities;

· Counseling the investors;

· Documentation;

· Internal transfer of funds and

· Closing investment account.

4.4.1 Opening of Investment Account

The Investors’ Scheme was launched in 1977 with the objective broadening the base of equity investment through mobilizing savings of small and medium savers for investment in the securities market. In view of strategic changes in policy reform, ICB has stopped opening of new investment account since 1 July 2002 ICB Capital Management Ltd.- a subsidiary of ICB has undertaken opening and managing of new investment account. However, ICB continued to manage its existing accounts only to fulfill its fiduciary obligations to the account holders. Now if an investor wants to open investment account he/ she must satisfy the following conditions:

§ Any Bangladeshi adult citizen, corporate bodies and statutory organizations are eligible for opening for opening an investment account. Persons of unsound mind or minors are not allowed to open such account. Minimum deposit for opening account is TK.10, 000 only. There is no fixed ceiling of additional deposit. Account holder may deposit any amount in phases according to his convenience.

§ Maximum two accounts can be opened by an individual. One account in his own name and another jointly with person. Corporate bodies/ statutory organizations shall not be allowed to open joint account.

§ Account can be opened by properly filling in prescribed application form and complying with other all requisite formalities.

§ At the time of opening account holders shall have to appear in person before the authorized officer of the company for completing legal formalities. An account holder can nominate another person to operate to portfolio account in the prescribed form at the time of opening account. The operator shall carry authority to operate the accounts freely. The actions of the operator in respect of operating portfolio accounts will be treated as actions of the account holder. Authority to operate the account can be assigned to an individual who has an existing account, either or both of the holders can operate the account. (ICML Brochure)

(Account Opening Form)*******************************

4.4.2 Classification of Investors:

Investors can be grouped according to their occupation and their savings. Under investors scheme investors may be Non Government Employees, Salaried Government, Retired Personnel, Housewives, and Working Women.

Table No.9

Occupation-wise classification of the investment account holders of ICB, Rajshahi Branch

Occupation	No. of account holders as on 30 June, 2005	Percentage
Salaried Government / Non-Government Employees	2202	57.40
Retired Personnel	123	3.32
Engineers, Doctors and Layers	165	4.15
Business/Agricultures	560	14.47
Housewives /Working Women	272	7.35
Workers	167	4.97
Others	263	8.35
Total	3752	100

Source: ICB Rajshahi Branch

Lack of sufficient information about the ICML, we are bound to present information of the investors categories all the ICML. The follows shows the occupation wise classification of the investment account holders of ICML who opened accounts during FY 2004-05;

Table No.10

Occupation-wise classification of the investment account holders of ICML

Occupation	No. of account holders as on 30 June, 2005	Percentage
Government / Non-Government Employees	1485	43.61
Retired Personnel	70	2.06
Engineers, Doctors and Layers	100	2.94
Businessmen /Agriculturists	891	26.17
Housewives /Working Women	315	9.25
Student	155	4.55
Workers	2	0.05
Others	387	11.37
Total	3405	100

Source. ICML annual report 2004-05

4.4.3 Loan under Investors’ Scheme

For purchasing shares and securities against the account, loans are sanctioned to investment account. Through the scheme an investor can get loan 1:1 ratio i. e. a loan of Tk.10, 000 is available against a deposit of Tk.5, 000. However this ratio may be changed from time to time as per the management’s decision. A maximum amount of loan of Tk. 300,000 can be sanctioned to an investment account. The following terms and conditions are to be maintained by the investors:

· The period of loan is one year;

· Interest charged against the loan is 12.50 percent;

· The mode of repayment is quarterly; and

· The loan must be utilized for acquisition of shares or debentures of listed public companies.

Mere opening of an account does not mean that it will get loan against it rather it largely depends upon the capability and availability of the fund of the corporation. It dose not allow the investors to utilize the entire loan amount in the single security, rather it encourages diversified investment with a view to minimize risk.

Table No.11

Loan sanctions against the Investment Account in Rajshahi Branch

(Taka in lac)

Year	Loan Sanction	No of account
2001-02	61.01	725
2002-03	192	800
2003-04	132.12	132
2004-05	346.56	347

Source. ICB Rajshahi Branch

Loan under Investor’s Scheme in ICML

Margin Loan will be provided on the basis on the debt/equity ratio of 50:50.Maximum loan limit will be Tk.10.00 lac for each account. Current interest rate is 13.00 percent. The loan will be utilized in purchasing securities from Pre-IPO placement, primary and secondary market. The assets in the portfolio will be held as collateral against loan and are subject to sale in the event the investor fails to maintain required equity margin or repay the loan when it becomes due and asked for payment by the company. No other collateral is adopted here for this loan. The company reserves the right to make any variation of the loan limit from time to time which will be binding on the investors. Loan availed by the investors at any time from the date of opening of account will become payable at the end of one year. However, on maintaining equity and upon request by the investor, the company at its own discretion may extend the period of loan as it considers appropriate .In the event of shortfall in equity, the investor(s) will pay the balance to maintain debt/equity at a level of 50:50 immediately after being informed by the company to so. If the investors failed to maintain the required equity, the company will have the right to sell the assets in order to compensate the equity shortfall and take other legal actions to recover all dues.

Current Year Net Margin Loan Disbursement by ICML in Rajshahi branch up to 28^th June is Tk.13.43 lac.

4.4.4 Sector wise Investment under Investors’ Scheme

In the following table we show the sectoral investment in the Investors’ Scheme in ICB Rajshahi branch.

Table No.12

Sector wise Investment under Investors’ Scheme, Rajshahi Branch

SL. No.	Sector	Financial year 2003-04	Financial year 2004-05
1.	Banks	79.32	150.32
2.	Investment	42.97	25.28
3.	Engineering	9.92	27.41
4.	Food & Allied	13.22	5.84
5.	Fuel & Power	33.06	40.22
6.	Jute	—	0.55
7.	Apparel	36.35	96.13
8.	Pharmaceutical & Chemical	49.58	78.81
9.	Paper & Printing	6.62	2.14
10.	Service & Real Estate	9.91	23.27
11.	Cement	3.30	17.21
12.	Miscellaneous	39.66	93.55
13.	Insurance	6.62	17.10
	Total	330.53	577.93

Source: ICB Rajshahi Branch

Now the investors’ Scheme is operating ICML Rajshahi Branch. This branch was established in 16^th June 2005.The following table shows the position of sectoral investments (Gross) under Investors’ Scheme of ICML up to 28^th June, 2006:

Table No.13

Sectoral investment at cost under Investors’ Scheme of ICML

SL.No.	Sector Name	No. of Shares	Amount
1.	Banks	17,790	89,93,608.50
2.	Cement	1,185	4,66,680.00
3.	Ceramics	50	3,600
4.	Engineering	19,700	6,85,855.00
5.	Food and Allied	10,640	3,34,475.00
6.	Fuel and Power	6,700	19,89,727.50
7.	Insurance	1,760	12,09,550.00
8.	Investments	34,460	5,38,245.00
9.	IT	22,000	2,95,450.00
10.	Miscellaneous	7,925	2,11,377.50
11.	Pharmaceuticals and Chemicals	49,711	42,38,107.00
12.	Service and Real State	1,330	93,982.50
13.	Tannery Industries	1,000	79,335.00
14.	Textile	96,850	31.90.671.90
15.	Total	2,71,101	2,23,30,664.90

Source. ICML of Rajshahi

4.4.5Transaction of securities

To place order for purchasing and selling securities should be communicated to the ICB in writing, telephonic or telegraphic form. Again direct purchase or sale with broker is not also allowed. Order one place is not usually cancelled. Cancellation can also be effective provided that the order is not executed.

Purchase of shares and debentures against an investment account are usually made. It can also be done in both primary and secondary markets. In case of secondary market transaction, ICB acts as an intermediary’s agent on behalf of the investors.

The selection of a portfolio for the investors is determined on the basis of past performance such as cash dividend, bonus share, right share, etc. It should be borne in mind that the principle of diversification of stock is followed in designing of portfolio with a view to minimizing the risk and maximizing the return.

The following table shows the transactions under Investors’ Scheme.

Table No.14

Transaction of securities under Investors’ Scheme in Rajshahi Branch

(Tk. in Crore)

Year	Securities Purchase	Increase/ Decrease in (%)	Securities Sold	Increase/ Decrease in (%)	Total Transaction	Increase/ Decrease in (%)
2002-03	1.35	…….	1.23	……	2.58	……
2003-04	2.81	108.15	3.42	178.05	6.23	141.47
2004-05	5.83	107.47	7.16	109.36	12.99	108.51

Source. ICB annual report 2003-04, 2004-05

4.4.6 Withdrawals of funds and securities

An investor is entitled to withdraw funds from his account, which remains unutilized. He can also withdraw securities whenever the account is closed and the entire corporation’s dues or outstanding against him are closed keeping TK. 5000 as balance.[1]

4.4.7 Counseling the investors

Counseling service is provided to diversify portfolio investment at a minimum risk so that minimum return and security of investment is ensured. The officials of ICML provide counseling and other services related to investment of fund to avoid speculative transactions and to constitute.

4.4.8 Internal transfer of funds

It is possible on the part of an investor to transfer his/ her fund from one account to another. He/ She can also transfer his/ her credit balance to debit balance account after maintaining necessary formalities. (ICML Brochure)

4.4.9 Closing of investment accounts

An account holder can close his account by adjusting the entire debit balance including margin loan, interest, service charges, brokerage commission and other charges ( if any).

After payment of full debit balance, the account holder can withdraw the securities and credit balance from the account at the time of closing. Once an investment account is closed, it can not be opened further. (ICML Brochure)

4.5 Role of Investors’ Scheme in capital market development and its operational activities

As mentioned earlier, a financial market has two parts, money market and secondary market. Money market deals with short term funds, which is generally of less than one year duration and the capital market deals with long term funds. In this regard three authors observe:

“A financial market can again be divided into two segments: non-security segment and security market. The security market is popularly known as capital market though in a security market not only long term securities such as shares, debentures etc. but also short term securities such as commercial papers, money market mutual funds etc. are traded.”[2]

Investor’s scheme has a close relationship with the securities segment. This securities segment of capital market can be divided into two parts: Primary market secondary market. Primary market deals with the new issues, while the secondary market deals with existent issues.” There is no additional flow of funds for inve