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Investment corporation of Pakistan.

Investment Corporation of Pakistan

The Investment Corporation of Pakistan (ICP) was established in 1966 through an Ordinance of the Federal Government of Pakistan. The objectives for the establishment of ICP are: (i) to develop the capital market, and (ii) to broaden the base of investments. The Corporation performs the following functions in order to fulfil its objectives:-

- Underwriting public issues of shares, providing financial assistance in local currency through purchase of Term Finance Certificates (TFCs) and providing funds for purchase of Locally Manufactured Machinery (LMM) under SBP Scheme

- Opening and maintaining investment accounts with a view to broadening the base of share ownership and widening the base of capital market

- Floating closed-end mutual funds with a view to providing a medium of pooled investment to small investors in the country

- Buying and selling shares of companies listed on stock exchanges to provide strength to the stock exchange.

The Corporation entertains applications from sponsors for underwriting public issues of shares and for term finance to meet the local currency cost. These funds are provided through the medium of Term Finance Certificates as following Islamisation debenture financing was discontinued. Under the Investors' Scheme, managed by the Corporation, Investment Accounts for purchase and sale of listed shares are opened and maintained with the objective of broadening the base of equity investments. In order to further strengthen the fulfilment of the objective, the Corporation introduced the medium of closed-end mutual funds in the country which provides an opportunity of pooled investment for small investors. The Corporation has also built-up its investment portfolio by making purchases/sales of shares on the stock market and through underwriting take-ups.

Financing Operations

The Corporation as a development finance institution arranges local currency funds for the needy industrial projects through purchase of TFCs and also provides funds on concessional terms for purchase of LMM. The Corporation since its inception has provided financial assistance to the important sectors of the economy like cotton textile, sugar, cement, engineering, fertilizer etc. The total financial assistance approved by ICP and its consortia members since 1966 to 1990 amounted to over Rs. 10 billion, of which ICP's own commitments amounted to Rs. 2.8 billion.

Investors' Scheme

The Corporation introduced the Investors' Scheme in 1967 for providing an opportunity to small investors to invest their savings in shares of listed companies. This is the only scheme of its kind, offered by any institution in the country for investment in shares. Under this Scheme, Investment Accounts are managed/operated by the Corporation through its nine branch-offices located, at Karachi, Lahore, Rawalpindi, Peshawar, Quetta, Faisalabad, Multan, Hyderabad and Islamabad.

Following Islamisation in 1980, the Investment Accounts under the Scheme are called "Sharing Accounts" and "Non-Sharing Accounts". Under the Sharing Accounts Scheme, the Corporation and the Account-holders pool their funds in the ratio of 60:40, subject to a maximum of Rs. 45,000/-in case of ICP and Rs. 30,000/-in investors case. The investors are allowed 60 per cent share in profit against the contribution of 40 per cent in portfolio, while the loss is shared by ICP and the investors in the ratio of 60:40 respectively. The Saring Accounts have been very popular and the Corporation through its Investors' Scheme has been very successful in its endeavours to broaden the base of equity investments in the country. But at present Sharing Accounts can only be opened by Pakistanis working abroad while resident Pakistanis can open "Non-Sharing Accounts" at any of the nine branch-offices of the Corporation.

The total number of Investment Accounts maintained at the nine branch-offfices of the Corporation stood over 11,945 as on June 30, 1990. The total investments (at cost) made through these accounts amounted to Rs. 593.3 million on June 30, 1990.

ICP Mutual Funds

It may be added that ICP is the first institution to have introduced closed-end mutual funds in the country through which funds of small investors are pooled together for the purchase of shares with the objective of providing the benefits of large portfolio to fund-holders. The First ICP Mutual Fund was offered for subscription to the general public in 1967. Following its successful launching, the Corporation since then has floated a series of 19 ICP Mutual Funds with total capital of Rs. 290.0 million and one large sized ICP State Enterprise Mutual Fund in 1980 with a capital of Rs. 280.0 million.

The Corporation's ability in managing the Mutual Funds in very well reflected in the soundness of their portfolios, which is evident from the fact that fundholders have been regularly receiving very attractive dividends. The rates of dividends on all the funds and the SEMF have been increasing and the Corporation paid dividends in the range of 14 per cent and 43 per cent for the year ended June 30, 1990.
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Publication:Economic Review
Article Type:company profile
Date:Dec 1, 1990
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