Investment Bank Investment Banking an American synonym of merchant banking.

Investment banks provide advice on mergers and acquisitions and are involved in financing industrial corporations through buying shares and selling them in relatively small lots to investors. In the Bangladesh context, merchant banking includes all institutions that combine the functions of both development banking and investment banking. The Securities and Exchange Commission, based on SRO No. 59 of 24 April 1996, and a decision taken by it on 17 August 1997, invited letters of intent from 14 institutions for registration of merchant banks. Prior to this decision, 7 institutions submitted such letters of intent and SEC gave registration to a total of 19. Types and functions Investment banking companies in Bangladesh are of two types: open-ended and closed-ended. The open-ended ones, generally referred to as mutual funds, repurchase shares in any quantity as and when holders offer them for sales. Thus, the amount of shares of the open-ended investment companies in market changes continually in response to public demand. Closed-ended investment companies sell only a specific number of ownership shares. An investor wanting to acquire shares of a closed-ended investment company must find another investor who wishes to sell. Investment companies do not take part in the transaction. In addition to selling equity shares, closedended companies issue a variety of debt and equity securities including preferred stock, regular and convertible bonds, and stock warrants for raising funds. Investment banks act as intermediaries between issuers and investors. The issuer sells securities to investment bankers who in turn sell the securities to investors. The investment banks own the securities until they are resold. For

firms seeking to raise long-term funds, investment banks provide assistance through a number of functions including underwriting, marketing of securities, corporate finance, sale and brokerage, asset management and research. In underwriting, investment banks can protect themselves by forming a syndicate, which allows them to diversify the risk. One investment bank acts as the managing underwriter that oversees the underwriting activities of all members of the syndicate. In the process of marketing, securities are typically sold through a selling group consisting of the sales division of the underwriting syndicate and selected retail brokerage houses. Another significant development in investment banking is the 'unsyndicated stock offering', in which, the corporation distributes the entire stock issue directly to institutional investors rather than syndicating them through a retail distribution network to individual investors. Corporate finance is the core activity in investment banking. Through this function, investment banks assist clients in developing projects, dealing with regulatory authorities, performing mergers and acquisitions, and capital structuring. The main function of investment banks in sales and brokerage is to provide full-service brokerage to retail and institutional investors, both foreign and local, in the secondary market. The asset management function of investment banks is a process of managing money. In the process, they analyse the objectives, risk tolerance, and legal restrictions of each client, and design a customised portfolio. The process continues with an ongoing measurement and evaluation of performance relative to benchmarks. Some investment banks in Bangladesh have research department to provide independent and objective investment advice in relation to primary and secondary securities to retail and institutional investors. Union Capital Limited is one such company, which publishes Union Bangladesh Index in

major English and Bengali newspapers. The index shows performance of selected blue-chip stocks of the Dhaka Stock Exchange. One of the major investment banks in Bangladesh, the Investment Corporation of Bangladesh (ICB), plays a leading role in developing the capital market in the country. Major functions of ICB include merchandising operations and operations of unit funds and mutual funds. It has an Investors' Account Scheme, which provides small investors with credit facilities for buying and selling shares listed with the Dhaka and Chittagong stock exchanges. It also helps investors achieve reasonable returns on investment in sound shares and provides institutional support to small investors for purchase and sale of shares. Under the scheme, small investors are to hold accounts with ICB for loans for purchase of securities. The interest charged is 13.5% per annum. The maximum amount of loan sanctioned in an account is Tk 200,000. On behalf of account holders, ICB purchases and sells securities and maintains the profit and loss accounts. An investor has the option of taking or not taking the loan. If no loan is taken, the investor can withdraw funds from the account to the extent in excess of the margin requirement. When an investor takes a loan, he/she can withdraw the amount appearing in the account as unutilised balance. Also, an investor can withdraw securities when his/her account is closed after clearing dues outstanding in the account. Under the scheme, ICB gives the custodian service in safekeeping securities of the account holders, and also collects allotment letters, share certificate, and dividends. ICB launched its Unit Fund Scheme on 10 April 1981. This is an open-end mutual fund, through which small and medium savers get an opportunity to invest their savings at any time of the year. The fund is divided into units known generally as ICB units, each of which bears a certain value in the assets of the fund. These units are sold to the public. ICB units can also be purchased by Bangladeshi citizens living abroad and foreigners residing in the country. Unit holders are the owners of the fund, while ICB takes the

responsibility of managing the fund and loading and unloading securities in their interest. ICB floated its first mutual fund in 1980 and the number of its mutual funds increased to 8 by 2000.The total paid up capital of the mutual funds is Tk 175 million. In 2001, the corporation disclosed its decision to issue the 9th mutual fund of Tk 100 million. In addition to ICB, a number of commercial banks also carry out investment banking functions in Bangladesh. The Securities and Exchange Commission (SEC) issues certificate of registration to institutes intending to operate as issue manager provided that they have a capital of at least Tk 2.5 million. The minimum capital requirement for an institution to become eligible for the certificate for operating as underwriter or portfolio manager is Tk 10 million. The SEC has a code of conduct for issue managers, underwriters and portfolio managers and is empowered to suspend or cancel the certificate of registration for its violation. About Investment Corporation of Bangladesh Investment Corporation of Bangladesh (ICB) established on 1 October 1976 under the Investment Corporation of Bangladesh Ordinance 1976. It is an investment bank established to accelerate the pace of industrialization and develop a sound securities market in Bangladesh. Initially, the activities of ICB were limited to underwriting public issue of shares, bridge financing, debenture financing and opening/maintaining investors' accounts (Investors' Scheme). ICB had largely expanded its areas and scope of activities and now provides various types of investment and banking services. Added activities include providing debenture loans to companies and loans to investors on margin trading basis, providing advances against ICB unit certificates, leasing of industrial equipment, managing unit fund and mutual funds, and participating in stock exchange for trading securities.

Initially, the authorized and paid up capital of the corporation was Tk 200 million divided into 2 million shares of Tk 100 each, subscribed by the government of Bangladesh (27%), Bangladesh Bank (12%), Bangladesh Shilpa Bank (6%), Bangladesh Shilpa Rin Sangstha (6%), Nationalised Commercial Banks (15%), Sadharan Bima Corporation (9%) and the general public (25%). The authorised and paid up capital of ICB was increased in 1999-2000 to Tk 1,000 million and Tk 466 million respectively. ICB is a listed company in both Dhaka and Chittagong Stock Exchanges. The reserve fund of the corporation was Tk 425.08 million on 30 June 2000 and the types of reserves were general reserves, building reserves and dividend equalisation reserves. Total fund of ICB during the year 1999-2000 was Tk 6,784.84 million which comprised shareholders' equity i.e., share capital, reserves and retained profits (Tk 894.97 million), long-term debts Tk 1,153.81 million, deferred interest (Tk 292.72 million), deferred liabilities (Tk 18.81 million), lease deposits (Tk 0.66 million), and other liabilities (Tk 4,423.83 million). On 30 June 2000, the total value of assets of ICB were valued at Tk 6,784.84 million comprising marketable securities (Tk 2,391.52 million), secured margin loans (Tk 1,503.40 million), unit advance account (Tk 19.60 million), bridging loan (Tk 339.44 million), debenture loans (Tk 4.40 million), leased equipment (Tk 7.95 million), and cash in hand and at banks, interest receivables and the premises and equipment under its own use. Since its inception up to 30 June 2000, ICB committed to provide a total of Tk 2,496.8 million in loans to 353 projects and it disbursed Tk 1,141.2 million to 307 of them. It acted as the trustee to the debenture issue for 12 companies and as manager to the issue for 39 companies. Advances Against Unit Certificate Scheme (introduced 1998) were Tk 43 million, cumulative amount of lease financing amounted to Tk 73.9 million involving 14 companies, and total net underwriting cum bridging loan commitment was Tk 1,164.80

million to 306 companies. ICB committed to provide net assistance in the form of direct underwriting of shares of Tk 702.6 million of 37 projects and debentures of Tk 120 million of 5 projects. As on 30 June 2000, the total gross outstanding loans of ICB stood at Tk 4,775.1 million and it recovered Tk 1,315.70 million. Up to the date, ICB floated 8 closed-end Mutual Funds with total paid up capital of Tk 175 million. The dates of issue of these Mutual Funds were 25 April 1980, 17 June 1984, 19 May 1985, 6 June 1986, 8 June 1987, 16 May 1988, 30 June 1995, and 23 July 1996. As on 30 June 2000, the cumulative net sale of units amounted to Tk 5,280.8 million for 42,985,690 units. The ICB unit certificates earned a net income of Tk 528 million during the year 1999-2000. The total number of unit holders on 30 June 2000 was 43,433 of which 58% were salaried employees of government and private organisations. The corporation introduced its Investors' Scheme in 1977. Under the scheme, it received a total deposit of Tk 22,177.5 million up to June 2000, while loans sanctioned and investments made amounted to Tk 3,715.2 million and Tk 4,410.6 million respectively. During the year 1999-2000, the corporation invested Tk 978.9 million in securities and on 30 June 2000, the market value of its portfolio stood at Tk 1,945.9 million. During the fiscal year 1999-2000, the corporation earned a net profit of Tk 59.4 million Besides its head office and the local office in Dhaka, ICB has 6 branch offices, one each at Chittagong, Rajshahi, Khulna, Barisal, Sylhet and Bogra. The head office has 4 broad divisions/wings and 31 departments under them. In 2001, ICB had 394 employees including 242 officers and 152 other staff. The managing director is the chief executive officer of the corporation and an 11member board of directors is its top policy making body. With the enactment of the Investment Corporation of Bangladesh

(Amendment) Act, 2000, ICB became empowered to create and operate subsidiaries. ICB has a plan to form three separate subsidiary companies -

ICB Capital Management Ltd, ICB Securities Trading Company, and ICB Asset Management Company Ltd. ICB is represented in the governing board of the South Asian Development Fund established in June, 1996 through the Dhaka Declaration of a meeting of the SAARC member countries. ICB is also associated with South Asian Regional Fund (SARF). Objectives

To encourage and broaden the base of investment. To develop the capital market. To provide for matters ancillary thereto. To mobilize savings. To promote and establish subsidiaries for business development.

Basic Functions Underwriting of initial public offering of shares and debentures Underwriting of right issue of shares Direct purchase of shares and debentures including Pre-IPO placement and equity participation Managing investors account Managing Open End and Closed End Mutual Funds Operating on the Stock Exchanges Providing investment counsel to issuers and investors Participating in Government divestment Program Participating in and financing of, joint-venture projects

Dealing in other matters related to capital market operations Trusty, Custodian, Bank Guarantee Consumer Credit

Business Policy
To act on commercial consideration with due regard to the interest of

industry, commerce, depositors, investors and to the public in general.

To provide financial assistance to projects subject to their economic

and commercial viability.

To arrange consortium of financial institutions including merchant

banks to provide equity support to projects 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 joint venture capital/project.

Continued Operations of ICB Private Placement Custodian and Banker to the Issues (IPO) Mergers and Acquisitions

Corporate Financial Advice Lease Finance Portfolio Investment Advance Against Unit Certificate Schemes Advance Against Mutual Fund Certificate Schemes Consumer Credit Scheme Bank Guarantee Training Program Trustee to the Debentures and Securities Assets

ICBs Subsidiary Companies

ICML ICB Capital Management Ltd IAMCL ICB Asset Management Company Ltd ISTCL ICB Securities Trading Company Ltd

ICML ICB Capital Management Ltd 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.

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.

Placement of Shares ICML acts as a placement agent. Investment Counseling ICML provides investment counsel to the issuers and investors' including financial engineering and corporate advisory services. 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. IAMCL ICB Asset Management Company Ltd Background ICB Asset Management Company Ltd. was established as part of the restructuring programme of ICB under Capital Market Development Programme (CMDP) initiated by the Government of Bangladesh and the Asian Development Bank. The Company was incorporated as a public limited company with an authorized capital of Tk. 100 crore and a nominal paid up capital of Tk. 2.00 lac, which was subsequently increased to Tk. 12.00 crore, under the Companies Act, 1994 with the Registrar of Joint Stock Companies and Firms on December 05, 2000. The Company obtained license on October 14, 2001 from the Securities and Exchange Commission (SEC) under Securities and Exchange Commission (Mutual Fund) Act 2010 to carry out the mutual fund activities. The company started its operation from July 01, 2002 upon issuance of Govt. gazette notification.

Business The company is engaged in investment management; more specifically floating and managing both open-end and closed end mutual funds. The company is dedicated towards development of mutual fund industry as well as the capital market of Bangladesh. Capital Structure (Taka in Lacs) Particulars Authorized Capital Paid up Capital Reserve Retained Profit Total June 30, 2010 June 30, 2009 10000.00 1200.00 1040.00 1749.24 3989.24 10000.00 750.00 1040.00 872.53 2662.53

MUTUAL FUNDS ICB Asset Management Company Ltd. has so far floated eleven 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 aggregate size of these funds is around Tk. 815.00 crore.

Conventional Mutual Funds: Sl.No. Name of the Funds Date of Nature of Size of

the Launching the Fund Fund (TK. crore) 1. 2. 3. 4. 5. 6. 7. ICB AMCL First Mutual Fund Prime Finance First Mutual Fund ICB AMCL Second Mutual Fund ICB Employees Provident Mutual Fund One: Scheme One Prime Bank 1st Mutual Fund Phoenix Finance 1st Mutual Fund ICB AMCl Unit Fund 16/06/2003 04/01/2009 09/08/2009 22/11/2009 06/12/2009 07/03/2010 21/06/2003 Close-end 10.00 Close-end 20.00 Close-end 50.00 Close-end 75.00 Close-end 100.00 Close-end 60.00 Open-end 150.00 in

Non-Conventional Mutual Funds: Sl.No. Name of the Funds Date Launching of Nature the Fund of Size the of Fund

(TK. crore) 1. 2. ICB AMCl Islamic Mutual Fund ICB AMCL First NRB Mutual Fund ICB AMCL Second NRB Mutual Fund ICB AMCL Third NRB Mutual Fund ICB AMCL Pension Holders' Unit Fund IFIL Islamic Mutual Fund-1 12/10/2004 28/01/2007 Close-end Close-end 10.00 10.00

in

3.

15/05/2008

Close-end

100.00

4.

28/03/2010

Close-end

100.00

5. 6.

18/10/2004 26/09/2010

Open-end Close-end

30.00 100.00

These funds received spectacular response from the investors. The business of the Islamic mutual funds should be inconsistence with the Sharia Law. With a view to tapping the savings of Non-Resident Bangladeshis (NRBs) for investment in the country's capital market, ICB Asset Management Company Ltd. lunched ICB AMCL First NRB Mutual Fund, ICB AMCL Second NRB Mutual Fund and ICB AMCL Second NRB Mutual Fund. Investors have shown overwhelming interest in all the mutual funds. ICB AMCL Unit Certificates and ICB AMCL Pension Holders 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. ICB along with some other banks and financial institutions extend loan facility against lien of units. The company plans to launch some other conventional mutual funds named First Agrani Bank Mutual Fund, Sonali

Bank Limited 1st Mutual Fund and specialized open-end mutual fund for NRBs named ICB AMCL NRB Unit Fund. ISTCL ICB Securities Trading Company Ltd Background ICB Securities Trading Company Limited (ISTCL) is a subsidiary of Investment Corporation of Bangladesh (ICB) under the provisions contained in Section-2 of the Companies Act, 1994. It was formed as a part of the restructuring programme of ICB under Capital Market Development Programme (CMDP) initiated by the Govt. of Bangladesh (GOB) and the Asian Development Bank (ADB) and in terms of power conferred in the ICB Ordinance. The company was incorporated with the Registrar of Joint Stock Companies and Firms under the Companies Act 1994 on 05 December 2000. The company obtained license from the Securities and Exchange Commission on 12 August 2002 to carry on the stock brokerage business. The company started its operation on 13 August 2002 upon the issuance of gazette notifications by the Government. The company is being operated pursuant to its own Memorandum and Articles of Associations, SEC's Rules and regulation and other applicable laws. It has independent Board of Directors and separate management. Corporate Service Provides online trading facilities for buying and selling securities listed with the bourses; Works as a full service Depository participant in the Central Depository System; Performs other brokerage services; Trades Securities for its own portfolio as Authorized Dealer of DSE; Acts as selling agent under "Direct Listing Regulations 2006".

Financial Indicators of ISTCL: Particulars Capital Structure Authorized Capital Paid up Capital Reserve Retained Earnings Financial Performance Revenue Income Income before Tax Income after Tax Financial Ratios Net Profit to Total Income(%) Return on Equity(%) Earning Per Share(Tk.) Dividend Per Share Dividend Payout Ratio(%) Current Ratios (Times) Net Asset Value(NAV) per Share(Tk.) 48.44 47.20 501.15 1:1B 19.96 1.32:1 1061.64 43.12 49.29 516.00 1:2B 38.76 1.29:1 1046.87 TK. 38.79 crore TK. 21.76 crore TK. 18.79 crore TK. 89.74 crore TK. 43.98 crore TK. 38.70 crore TK. 50.00 crore TK. 3.75 crore TK. 26.55 crore TK. 5.76 crore TK. 50.00 crore TK. 7.50 crore TK. 39.55 crore TK. 31.47 crore 2008-2009 2009-2010

Year wise IPO floating Amount Analysis:

2010 Total Amount No. of Companies Average

8412.35 million 9 934.71 million

2009 Total Amount No. of Companies Average 2008 Total Amount No. of Companies Average 2007 Total Amount No. of Companies Average 2006 Total Amount No. of Companies Average 2005 Total Amount No. of Companies Average

12492 million 17 734.82 million

3043.41 million 12 253.62 million

3463.96 million 13 266.46 million

1243.7595 million 11 113.07 million

1233.24 million 15 82. 22 million

If we look into the trend of IPO size we can see that the yearly aggregate IPO floating amount in the year 2005 and 2006 was around 1200 million BDT. In 2007 the amount grew by 280% as that of 2006 and totaled to around 3464 million BDT, In 2008 the amount was lower than the previous year by 12.15% and amounted to 3043.41 million. In 2009 the yearly aggregate amount was at its peak level of our analysis through the years 2005 till 2010, which was 12492 million, a growth of above 260%. Lastly in 2010 it again fell down by 4079.65 million 8412.35 million, 1/3 decline than that of 2009. So finally we can say in terms of year to year growth, 2007 had the most amount of

growth of 280%, and in terms of aggregate IPO size the year 2008 had the maximum floated amount. The average authorized capital base (size) for each of thecompanies that off loaded its shares through IPO to the capital market during each of the years from 2005 till 2010 had a significantly increasing trend as in 2005 it was 82.22 million, whereas, in 2010 it was 934.71 million.