Sandhani Life UF Growth

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Sandhani Life Growth Fund

SPONSORED LINKS

Sandhani Insurance will sponsor mutual fund, titled 'Sandhani Life Growth Fund' with the size of Tk 2.0 billion(200

crore), with face value of Tk 10 each after taking proper permission from all regulatory authorities concerned.

The board of directors of the company took this decision.

Asian Tiger Capital Partners Asset Management Ltd will be the asset management company for the proposed fund.

The company also will sponsor a mutual fund, titled 'Sandhani Life Unit Fund' with the size of Tk 500 million with

face value of Tk 10 each after taking proper permission from all regulatory authorities concerned. Alif Asset

Management Ltd will be the asset management company for the proposed fund.

Size of IPO: Tk 2.0 billion (200 crore) closed-end mutual fund.

Sponsored By: Sandhani Life Insurance Company LimitedFace Value : Tk. 10Offer Price: Tk. 10Market lot : 500

What Does Initial Public Offering IPO Mean?

Back to basic. We are getting a few questions on these nowadays. And we suppose bdipo should eventually contain

most, if not the entire information about IPO, and IPO in Bangladesh. So, here it goes

IPO is the first sale of stock by a private company to the public. IPOs are often issued by smaller, youngercompanies seeking the capital to expand, but can also be done by large privately owned companies looking to

become publicly traded.

In an IPO, the issuer obtains the assistance of an underwriting firm, which helps it determine what type of security to

issue (common or preferred), the best offering price and the time to bring it to market.

Also referred to as a public offering.

What Does Share Purchase Rights Mean?

A type of security that gives the holder the option, but not the obligation, to purchase a predetermined number of

shares at a predetermined price. These rights are typically distributed to existing shareholders, who have the ability

to trade these rights on an exchange.

The rights only give shareholders the ability to purchase the shares, but they must still pay for the shares to redeem

the rights.

The portion of a companys profit allocated to each outstanding share of common stock. Earnings per share serves as

an indicator of a companys profitability.

EPS calculated as:

When calculating, it is more accurate to use a weighted average number of shares outstanding over the reporting

term, because the number of shares outstanding can change over time. However, data sources sometimes simplify
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the calculation by using the number of shares outstanding at the end of the period.

Diluted EPS expands on basic EPS by including the shares of convertibles or warrants outstanding in the

outstanding shares number.

More Explanation on EPS

Earnings Per Share is generally considered to be the single most important variable in determining a shares price. It

is also a major component used to calculate the price-to-earnings valuation ratio.

For example, assume that a company has a net income of Tk. 25 crore. If the company pays out Tk. 1 cr. in preferred

dividends and has 10 cr. shares for half of the year and 15 cr. shares for the other half, the EPS would be Tk. 1.92 (=

24 /12.5).

Here, the Tk. 1 cr. is deducted from the net income to get Tk. 24 cr., then a weighted average is taken to find the

number of shares outstanding (0.5 x 10 cr.+ 0.5 x 15 cr. = 12.5 cr.).

An important aspect of EPS thats often ignored is the capital that is required to generate the earnings (net income)

in the calculation. Two companies could generate the same EPS number, but one could do so with less equity

(investment) that company would be more efficient at using its capital to generate income and, all other things

being equal would be a better company. Price Earning (PE) Ratio, however, offsets that bias.

Investors also need to be aware of earnings manipulation that will affect the quality of the earnings number. It is

important not to rely on any one financial measure, but to use it in conjunction with statement analysis and other

measures.

This is a valuation ratio of a companys current share price compared to its per-share earnings (EPS).

P/E Ratio is calculated as:

Price Earning ratio = Market Price of a share / Earnings Per Share

For example, if a company is currently trading at Tk.100 a share and earnings over the last 12 months (EPS) wereTk. 5 per share, the P/E ratio for the stock would be 20.0 (Tk. 100/Tk. 5).

EPS is usually from the last four quarters (trailing P/E), but sometimes it can be taken from the estimates of earnings

expected in the next four quarters (projected or forward P/E).

A third variation uses the sum of the last two actual quarters and the estimates of the next two quarters.

P/E Ration is also sometimes known as price multiple or earnings multiple.

In general, a high P/E suggests that investors are expecting higher earnings growth in the future compared to

companies with a lower P/E.

However, the P/E ratio doesnt tell us the whole story by itself. Its usually more useful to compare the P/E ratios ofone company to other companies in the same industry, to the market in general or against the companys own

historical P/E. It would not be useful for investors using the P/E ratio as a basis for their investment to compare the

P/E of a financial company (e.g. AB Bank) to a utility company (e.g. DESCO) as each industry has much differentgrowth prospects.

The P/E is sometimes referred to as the multiple, because it shows how much investors are willing to pay per Taka

of earnings. If a company were currently trading at a multiple (P/E) of 20, the interpretation is that an investor is

willing to pay Tk. 20 for Tk. 1 of current earnings.
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It is important that investors note a problem that arises with the P/E measure, and to avoid basing a decision on this

measure alone. The denominator (earnings) is based on an accounting measure of earnings that is susceptible to

forms of manipulation, making the quality of the P/E only as good as the quality of the underlying earnings number

What is Net Asset Value (NAV)?

Net Asset Value (NAV) is the value of an entitys assets less the value of its liabilities. In other words, it is the total

equity plus the retained earnings of a company.

Internationally the term is most commonly used in relation to mutual funds due to the fact that shares of such funds

are often redeemed at their net asset value. For mutual funds NAV per share is computed based on the closing

market prices of the securities in the funds portfolio.

However, in Bangladesh the term is also used as a synonym for book value or the equity value of a business. Net

asset value here represents the value of the total equity and retained earnings. Net Asset Value per Share is

computed by dividing the NAV by the number of shares outstanding held by investors.

It is a valuation of a stock considering the company is liquidated on the date.

In determining whether shares in a public company are a cheap or expensive investment, one tool used by investors

is a comparison of the companys current market capitalization (the price at which the market values the company,

i.e. market price) with its NAV. The NAV may be below the market price for the following reasons:

* Investors believe that the company has significant growth prospects. They are prepared to pay more for the

company than its NAV.

* The current value of a companys assets likely differs than the historical cost financial statements used in the NAVcalculation.

* Certain assets, such as goodwill (which broadly represents a companys ability to make future profits), are notnecessarily included on a balance sheet and so will not appear in an NAV calculation.

If a companys market value (or share price) is significantly lower than its NAV per share for a long period it ismore profitable for the shareholders to wind up the company than to continue operation.


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Investor Relations

Prime Finance Asset Management Company Limited with experience can make your investing idea a smart move

for brighter future. Financial asset management professionals can help an individual or a company to make the

right investment decision on the period of fluctuating or volatile stock market. Fund manager can lead clientstowards profit by assessing the right type of instrument for diversified portfolio holdings to carry more risk.

We believe that investments are for life. We therefore endeavor to partner you through different stages in your life

and help you achieve your financial goals. Financial Asset Management have always remained an issue of higher

concern but its role becomes of optimum utility in period of financial instability and capacity as to make wise and

right decision, something that later on can lead an investor on higher growth path.

How you can invest in Mutual Funds

It is very easy for you to invest in our mutual fund designed to suit your needs.

Buy our open-end fund

Buy through PAMC

Buy through Selling Agent (Selling Agent) List will appear

Buy Online (In Future)

The success story of Prime Finance & Investment Limited has paved the way for Prime Finance Asset Management Company Limited. Since

registration with SEC in March 2009, we are on a well composed journey to chart our own course as one of the pioneering private sector asset

management company of Bangladesh.

Our Business

Mutual Fund

All mutual funds fall into one of two broad categories: open-end funds and closed-end funds. Worldwide most mutual funds are open-end but

in Bangladesh the scenario is opposite.

Open-end FundsThe reason why these funds are called "open-end" is because there is no limit to the number of new units that they can issue. New and existingunit holders may add as much money to the fund as they want and the fund will simply issue new units to them. They are not traded on

exchanges but purchase and redemption is processed through the mutual fund company and its agents.

Our open-end fund:

Prime Financial First Mutual Fun

Closed-end FundsClosed-end funds behave more like stock than open-end funds. They issue a fixed number of units to the public in an initial public offering,

after which time units in the fund are bought and sold on a stock exchange. The price of a unit in a closed-end fund is determined entirely by

market demand, so units can be either traded below their net asset value (NAV) or above it. You can purchase units in a closed-end fundthrough a broker, just as you would purchase a share of stock.

Our closed-end fund:

Prime Finance Second Mutual Fund (Ongoing Pre-IPO placement)

Rupali Life Insurance First Mutual Fund (Ongoing Pre-IPO placement)

Corporat Advisory

Valuation and closing of Private Equity dealThere are many Private equity deals are taken place in Bangladesh by both local and foreign investors. This type of deal requires preparationof Information Memorandum, proper valuation, preparation of legal documents etc. By the service of PAMC, all of these works can be

conducted professionally and efficiently.

Pre-IPO advisory service

According to the current law, companies with paid up capital above BDT 50 crore is obligated to get listed. Again, some companies may findcapital market as a source of raising capital or increase liquidity of the stocks of those company. But, many of these companies remain

unaware about expected valuation of their stock. Yearly accounts of these companies may also not prepare properly for the past years, which is

a must for getting listed in the stock exchanges. PAMC provides professional Pre-IPO advisory service including preparation of Pre-IPO

Information Memorandum with expected IPO valuation, preparation of previous years accounts etc.

Merger & Acquisition

Merger and acquisition can be used to create value to the owners of both companies. In this case, value of the combined company may reach at

5 where summation of value of the two companies can be 4. All type of service related to Merger & Acquisition is provided by PAMC.

Corporate restructuring


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Alliance Capital Asset Management Limited (ACAML), asset manager of MTB Unit Fund, heldtraining sessions for the sales agents of the fund in the city recently.

MTB Unit Fund is an open-ended fund with an initial size of BDT 100 crore. Mutual Trust BankLimited has provided Tk 20 crore as the sponsor of the fund. Bangladesh General InsuranceCompany Limited is the trustee and BRAC Bank Limited is the custodian of the fund. As anopen-ended fund, MTB Unit Fund will not be listed on the stock exchanges. Units of the fund,

initial subscription of which starts from April 15, 2012, will be sold from 115 sales centres of21 sales agents across the country. These sales centres will make it easy for the investors tobuy, sell or transfer their units without any hassle. MTB Unit fund is the first open-ended fundwith certificates in dematerialized form and comes to the market at a time when the DSE P/Eratio is hovering around 14.

The sales agents were trained thoroughly about the product and also the sales andrepurchase procedures as they will have to answer queries of the investors, acceptapplication, repurchase or transfer forms and deliver necessary papers or cheques to them.Addressing the occasion, the sales agents welcomed the new product and expressed theiroptimism that the newly launched unit fund will be able to attract the investors through itsprofessional efficiency and large network of sales-centre

ICB Unit FundIntroductionSponsored by the Government of Bangladesh, ICB Unit Fund was established on April 10, 1981. Its main objective is to mobilizesavings through sale of its units to small investors and invest these funds in marketable securities. The scheme provides a potential

source of equity and debt to industrial and commercial concerns and thus contribute to the industrial development of the country.Unit fund is an open ended Mutual Fund. It provides an opportunity to the unit holders to invest their funds in a well managed anddiversified portfolio with a high degree of security of capital and reasonable yearly returns.ICB units are securities within the meaning of Trust Act. 1882.

Issue, Transfer and Surrender of Unit Certificates

(I) Units are available in 1, 5, 10, 50, 100, 500, 1000, & 5000 denominations. The names with addresses of the holders are recordedand dividends are dispatched to them accorded and dividends are dispatched to them accordingly.(II) Units may be transferred through prescribed transfer form duly filled in and signed by the transferor and transferee. No stampduty is required for such transfers.

(III) Units may be encased by way of surrendering the certificates along with the prescribed surrender forms duly filled in andsigned by the registered holders and no prior notice is required. The certificates are required to be surrendered at the prevailingRepurchase Price.

Registration Number

Units are issued as registered certificates. An existing Unit holder is required to mention the previous registration number on thespecified column of the application form when he/she intends to buy Units again.Price Fixation

Changes in repurchase prices of units are notified through the newspapers and price of a Unit is fixed periodically by ICB as itsfund manager. Among others, valuation of the assets of the Fund are taken into consideration while fixing price of a unit.Public Participation

The Fund is divided into units which are generally known as "ICB Unit". Each Unit bears a certain value in the assets of the Fund.

The Unit holders are the owners of the fund and only they are benefited from it. Unit certificates can be purchased in single or jointname (s). At present maximum of 10,000 Units can be purchased in a single or joint name(S) at a time. Units are not sold toinstitutions.

Professional CounselingProfessional Counseling is rendered to the prospective & existing investors who are eager to purchase ICB Units through ICBoffices and authorized Bank branches. Presently this scheme is operated by ICB Asset Management Company Limited.Investment by Bangladeshi Citizens Abroad

The Bangladeshi citizens living abroad may invest in certificates on fulfillment of the following terms and conditions:(I) The value of Units purchased is to be remitted through bank channel,(II) The money invested in Units and benefits thereon are not allowed to be repatriated,(III) The investors must mention their local and bank addresses in Bangladesh for convenience of registration of Units.Investment by Foreigners Residing in Bangladesh

organze or s nee s.

Market research service

To conduct business successfully, market research is a must. By using this report, an investor may know about important information to

identify and analyze the market need, market size and competition. It may also help to target appropriate customer group as well as to

formulate the best strategy.

Industry analysis service

Industry analysis examines total value chain of an industry. This encompasses scrutinizing the suppliers, customers, competitors etc. This data

may be used to formulate a better strategy and be aware of potential threats.

Financial management service

Without proper financial management policy, a large portion of a companys profitability may be washed away. Appropriate capital structurenot only enhances profitability but also helps the business to assume appropriate level of risk. In addition, proper dividend policy can play a

significant role to increase value of the company as well as price of a stock, if it is listed.

Conversion of legal status

According to the current law, a Private limited company with paid up capital more than BDT 40 crore must be converted into a Public limitedcompany. Though many Private companies crossed the paid up capital limit of BDT 40 crore, those companies didnt take any initiative to

convert. PAMC provides professional advising service to help them complete the conversion successfully.

Formation of companies

Formation of new company is a complex work. And the company may want to have financial projection of the companys future operation.PAMC can provide this company formation service as well as financial projection service


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The foreign nationals residing in Bangladesh may also invest in Unit Certificates, provided they produce certificates to the effect

that money being invested are their own savings and is not borrowed as loan or overdraft from any bank. These certificates are to becollected from a Gazetted Officer or a Banker not below the rank or Deputy General Manager.Fund Management

The responsibility of managing the fund rests on ICB for which management fee @ Tk. 1.25 per Unit (net outstanding) is charged.

The Corporation also discharges the responsibility of loading and unloading of securities in and from the portfolio in the interest ofthe Unit holders. It is also the custodian of all assets of the fund.

DividendThe total income earned on investment/ deployment of funds, net of expenditures incurred, in a financial year is distributed among

the unit holders as dividend. Dividend is normally declared at the end of July each year by the Board of Directors of ICB. DividendWarrants are despatched soon after declaration of dividend. Since launching of the scheme in 1981 till FY 2004-05 the rates ofyearly dividend declared/ paid are as under:

Financial Year Rate of dividend per ICB

unit Certificate(Tk.)

Financial Year Rate of dividend per unit

(Tk.)

1980-81

1981-82

1982-83

1983-84

1984-85

1985-86

1986-87

1987-88

1988-89

1989-90

1990-91

1991-921992-93

1993-94

1994-95

1995-96

15.00

16.00

16.25

17.00

20.00

21.00

24.0

24.00

25.00

25.00

18.00

16.7017.00

17.40

17.50

17.00

1996-97

1997-98

1998-99

1999-2000

2000-2001

2001-2002

2002-2003

2003-2004

2004-2005

2005-2006

2006-2007

2007-20082008-2009

2009-2010

17.50

14.00

12.00

12.00

12.00

12.30

12.30

11.50

12.00

12.00

13.00

20.0022.00

26.00

Tax Benefits(I) Investment in Units enjoys the benefit of Investment Allowance under Sec. 44 of Income Tax ordinance 1984.(II) Units are treated as approved securities in accordance with the Section 2993 of the Companies Act.,1994 and Insurance Act,1938. These are also treated as Securities as per Sec. 20 of the Trust Act, 1882.Cumulative Investment Plan (CIP)

Under this scheme a holder instead of receiving dividend may reinvest such dividend income accrued for purchasing Unit at a

concessional rate. In such case, Units are issued at Tk. 1.00 less than the opening price of the financial year.Duplicate Dividend Warrants

Incase dividend warrants are not received in time, it should be communicated to ICB head office immediately. Duplicate warrantsare issued subject to completion of required formalities and execution of an Indemnity Bond on non-judicial stamp as applicable.Change of Address

Unit holders should immediately communicate any charge of address to the issuing offices so that no problem arises in dispatching

dividends and surrendering the certificates.Transaction Hours

Transactions are held during banking hours every day excepting Thursday and holidays. Transactions do not take place during the

month of July each year due to book-closure.Where Units are Available

Units are purchased at ICB Head Office and at its Branches at Dhaka , Chittagong , Rajshahi, Khulna , Sylhet, Barisal and Bogra.Fifty seven branches of Sonali Bank, Agrani Bank, Janata Bank, Rupali Bank Ltd., Uttara Bank Ltd., Pubali Bank Ltd., IFIC BankLtd., Bangladesh Krishi Bank, Prime Bank Ltd., Dhaka Bank Ltd., Bangladesh Shipla Rin Shangstha, United Commercial Bank

Ltd., The City Bank Ltd., and Estern Bank Ltd. locate at important cities all over the country, are also engaged in selling andrepurchasing of unit certificates.Conclusion

ICB Unit is an open-ended Mutual Fund. Investment in Units is safe and ensure a continuous and regular source of income for the

holders. Units are easily encashable. As such, investment in Unit is comparatively more attractive. By investing in this scheme an


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asset management company of the country. The company was formally inaugurated on August29, 1999 by the Finance Minister and remained as the only one of its kind for the next decade inBangladesh.

Our maiden venture, AIMS First Guaranteed Mutual Fund, a closed end balanced fund, obtainedapproval of the SEC and was floated in March 2000. The public float was oversubscribed by eight

times. The Fund was listed at the stock exchanges in May 2000 creating a landmark in the historyof the capital market in Bangladesh.

It was the first step of a long journey and there was no looking back. In a short time AIMSpositioned itself at home and abroad as a proactive research oriented and knowledge basedfinancial advisory and services manager as well as solution provider, specializing in diagnosticanalysis, product design, development and launch, earning confidence all along the way.

On our ninth year of operation we procured and moved to our own office premise.

Our capacity to deliver and the capabilities of AIMS is further manifested on being appointed asthe Fund Manager of the internationally acclaimed Grameen Bank for the first mutual fundsponsored by it as well as advising BRAC, the largest NGO in the world, on feasibility of thesecuritization of their micro-credit receivables in a pioneering attempt.

We have thrived under challenge and excelled in venturing into hitherto unexplored grounds andare committed to continue doing so to the satisfaction of our clients, patrons and friends...

AIMS FIRST GUARANTEED MUTUAL FUND

AIMSof Bangladesh conceived the idea and launched the Tk70 million pioneering first mutual fund inBangladesh under private initiative the AIMS First Guaranteed Mutual Fund in year 2000 with a five yearinitial tenure, as the Asset Manager. Initially the size was contemplated at Tk50 million only but owing tounprecedented over-subscription for the IPO (about nine times) the size was increased by another Tk20

million on public demand. The fund was sponsored by top ranked financial institutions representing everysegment of the local financial sector, which played a pioneering role in developing a matured investmentculture in the country. The proud Sponsors are IDLC Finance L:imited (formerly IDLC of BangladeshLimited), IPDC of Bangladesh Limited, Southeast Bank Limited, Uttara Finance & Investments Limited,Pangaea Partners (BD) Limited, Sandhani Life Insurance Company Limited, Sandhani Credit CooperativeSociety Limited and Bangladesh Industrial Finance Company Limited. The size of the fund was laterincreased to Tk140 million by the enthusiastic general unit-holders and the life extended by another tenyears in 2005. In 2007 the paid-up capital was furthert raised to TK168 million through distribution 20%stock dividend to all unitholders. In 2010 the paid-up capital further raised to Tk414.5 million after isuing70% bonus and 130% right to the unitholders. Bangladesh General Insurance Company Limited, the firstgeneral insurance company of Bangladesh is the Trustee of the fund and the BRAC Bank is the Custodian.It has paid dividends ranging between 7%-30% to the unit holders during the past years. The closed-endfund has a unique capital guarantee feature, hitherto unknown in the local market. It is listed at the Dhakaand the Chittagong Stock Exchanges.

Mastering MF

Bangladesh has a very small market for mutual funds. As reported in an earlier article in a local English daily on Wednesday,

October 28, 2009, currently 17 mutual funds trade at an average of 2.75 times their net asset value (NAV) and 75 times their

earnings. The article also said that a sample of 21 mutual funds in the Asia Pacific region is traded at 0.91 times or below their


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NAV on average. Till now, 19 mutual funds together account for less than 3% of our total market capitalization with combined

assets of less than Tk. 2,000 crores. However, this small market is not happy at all at this moment.

A very serious but interesting debate has been looming for the last couple of weeks regarding the mutual funds in

Bangladesh. The SEC implemented revised mutual fund regulations on July 22 that prohibited the mutual funds from issuing

new shares either in the form of right or bonus shares to increase their capital bases. After this amendment faced writ petition

from investors, The High Court on November 09, 2009 allowed mutual funds to raise their size by issuing bonus and rights,

without curbing the securities regulators absolute power to determine which funds would be eligible to expand capital base

although this verdict was suspended hours after announcement giving the SEC adequate time to appeal. On the following day,

the benchmark Dhaka Stock Exchange (DSE) General Index (DGEN) gained 17.41 points or 0.51 per cent to close at 3428.89,

which was a new high. The broader DSE All Shares Price Index (DSI) moved up 14.38 points or 0.50 per cent to close at

2871.75 while DSE-20 blue chips index rose 10.24 points or 0.44 per cent to close at 2313.01. Although the market move was

led by the mutual fund on that day, following days were worse in the market, and the issue in the high court is still pending

creating uncertainty among thousands of innocent general investors.

Close end vs. open end funds: As everyone knows, mutual funds offer investors: (i) economies of scale by reducing costs and

increasing investment returns; (ii) divisibility and diversification; (iii) active management with superior stock picking and

market timing; (iv) reinvestment of dividends, interest and capital gains; (v) tax-efficiency; and (vi) buying and selling

flexibility. Two major classes of mutual funds are closed end and open end. In Bangladesh, all 19 mutual funds are closed end

in nature.

A closed-end fund is a publicly traded investment company that raises a fixed amount of capital through an initial public

offering (IPO). The fund is then structured, listed and traded like a stock on a stock exchange. It raises a prescribed amount of

capital only once through an IPO by issuing a fixed amount of shares, which are purchased by investors in the closed-end fund

as stock. Unlike regular stocks, closed-end fund stock represents an interest in a specialized portfolio of securities that is

actively managed by an investment advisor and which typically concentrates on a specific industry, geographic market, or

sector. The stock prices of a closed-end fund fluctuate according to market forces (supply and demand) as well as the

changing values of the securities in the funds holdings.

Contrary to the closed end funds, open end mutual fund that does not have restrictions on the amount of shares the fund will

issue. If demand is high enough, the fund will continue to issue shares no matter how many investors there are. Open-end

funds also buy back shares when investors wish to sell. Globally, the majority of mutual funds are open-end. By continuously

selling and buying back fund shares, these funds provide investors with a very useful and convenient investing vehicle. It

should be noted that when a funds investment manager(s) determine that a funds total assets have become too large to

effectively execute its stated objective, the fund will be closed to new investors and in extreme cases, be closed to new

investment by existing fund investors.

Closed end funds should announce rights and bonus: As explained earlier, Open end funds essential can increase their capital

base issuing new shares whenever they want. But closed end funds cannot do the same. Closed end funds cannot issue new

shares. These funds can only expand their capital base by issuing bonus or rights, and no new shares can be issued or

redemption of old shares can be done. This is the uniform definition of closed end mutual funds and accordingly practiced

worldwide. Asset management companies from the Wall Street to Bombay are managing for years following this uniform

definition. Morgan Stanley defines clearly, Close ended funds cannot issue new units except through a bonus or rights issue.

Hence, unit capital of open ended funds can fluctuate daily. In the case of close ended schemes, new investors can buy units

only from the secondary market. Even our neighboring country India has the same provision and the growth of mutual fund

industry is substantially mentionable there.

Interestingly, the SEC in Bangladesh is not much positive in allowing the mutual funds to follow this globally acceptedpractice. The SEC is going to appeal against the verdict of the High Court. We do not perceive any problem in allowing such

provision which is practiced globally.

Bonus issuance is fairly common among the mutual fund issuers. The news about bonus issues is normally received positively

by shareholders. The same goes for units of mutual funds. Bonus is normally done when the Net Asset Value (NAV) of the fund

is at respectable levels. Lets look at some examples of such rights issues. Launched in September 1986, UTI Mastershare

Indias one of the largest funds, has been a consistent performer with 17 years of uninterrupted track record of dividends.

There have been two rights issues and three bonus issues since inception as can be found from its statistics: 1986-87: 8%

1987-88:13% 1988-89:18% (Rights 1:2), 1989-90:18%, 1990-91:18%, 1991-92:18% (Bonus 1:2), 1992-93:18%, 1993-94:20%


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(Bonus 1:3 and Rights 1:1), 1994-95:16%, 1995-96:16% (Bonus 1:5), 1996-97:16%, 1997-98:16%, 1998-99:16%, May

2000:16%, October 2001 : 10% (Association of Mutual Funds in India, 2009). Lets take a look at the history of such closed

end mutual funds. In the Western markets, investors had poured record-breaking sums of money into mutual funds in the

1990s so far, and closed-end funds were also enjoying an infusion of new capital. From 1990 1992, Of the 11 rights

offerings in the last two years, four required five rights to purchase one share. The Mexico Fund required only three rights to

buy one share; the fund with the most stringent standard, the Royce Value Trust, required 20 rights to buy one share. These

funds were raising millions of dollars by initiating rights offerings, invitations to current investors to buy additional shares.Rights offerings, which were virtually unheard of among closed-end funds in the 80s, are rapidly spreading. Four offerings

came to market last year and seven so far in 1992. Until about 1981, most closed-end funds sold at steep discounts to their

net asset value. To reduce the huge discounts, fund managers began buying back shares on the open market. In the USA and

the world, todays flurry of rights offerings is the opposite of that share-buyback trend. Many closed-end funds now sell for

small discounts or for premiums. With demand for fund shares strong, managers are inviting investors to buy even more

shares. The funds increase capital through rights offerings because under law they cannot otherwise sell shares at less than

net asset value.

Looming uncertainties and our concerns: Current performance of the mutual funds in the secondary market of Bangladesh yet

has not been noteworthy. The return is well below the annualized market return of approximately 29% in the Dhaka Stock

Exchange. On the contrary, investors have gained around 350% of return on the last six mutual funds participating in their

Initial Public Offerings (IPO) even if those investors had sold them within next three months after the first days trade. This

situation has motivated many investors to participate in the private placement and IPO of the mutual funds in the recentyears. It has attracted a good number of investors with a substantial amount of investment although larger portion of the

investors were not able to participate due to limited supply. Realizing this high demand supply gap in the private placement

and IPO, in the recent times there have been many new issuers of mutual funds who have already finished the formalities with

the regulators, and many others whose proposals are on the board positively. This is essentially a strong signal for the

development of an organic capital market offering a safe alternative investment avenue for the investors that really can

reduce the excessive and aggressive dependence on equity stocks.

But things have become little bit difficult at the same time. Although at the pre-IPO or IPO phase investors are profiting well,

secondary market for mutual funds has remained much less profitable still. Since, investors are not really impressed by the

marginal performance investing in the mutual funds; they feel reluctant to put money in mutual funds in the secondary

market. Many of the investors have complained of waiting too long for a point difference benefit or facing forced sale to avoid

further loss and recover he opportunity loss. Therefore, the consequence is clear. A dull secondary market for mutual funds

have been restricting investors to take its advantage properly, and thus making more investors negative to it everyday. Less

demand in the secondary market is essentially making the IPOs or Private placements much less attractive since investors at

these stages are in fear of loosing money or illiquidity of their investment in the current status of the secondary market for

mutual funds. Thus recently, talking to couple of potential fund issuers, a fear of illiquidity for their potential new fund issues

has been noticed. This is quite logical, rational, inevitable, and the crude realty.

At this stage, a globally accepted and traditionally practiced issue like issuance of bonus and rights by mutual funds can be

very crucial to protect market from further unattractive to the investor. The question is yet not clearly answered why the SEC

is reluctant to allow the funds to do so. Or why does the SEC have to go the court to decide on such issue which has been

practiced globally for the ages? Whatever the answers are, this decision is extremely important for the current market

condition for the mutual funds. The unattractive market may go down severely breaking down the confidence and

expectations of the general investors, if the decision becomes negative from the High Court. To save the market keeping on

track with global practices, and considering the investors psychology and future of mutual fund market, the decision

deserves to be in favor of the investors. May the SEC realizes it.

- Suborna Barua

Lecturer, United International University

and

Chief Executive Officer

FinCap Analyst and Advisory Services Limited

(A Professional Research Institute on the

financial markets located at Dhaka)


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First ever open-end mutual fund to hit local bourses early next year

The country's first ever open-end mutual fund will hit bourses early next year, expanding the orbit of stock market

and providing share holders a very useful and convenient investing vehicle.

Prime Finance Asset Management Company Limited (PFAMCL) would float the mutual fund, with initial size of

Tk500 million, in the first quarter of 2010, company officials said Saturday.

Securities regulater said it will be the first open-end mutual fund in Bangladesh's stock market history, as all 18

mutual funds now operating in the bourses are closed-end.

"Our rules allow launching of open-end mutual fund in the capital market," Securities and Exchange Commission

chairman Md Ziaul Haque Khondker told the FE.

"If everything goes in line with the securities rules, Prime Finance's fund would be the first such kind to be listed

with the stock exchanges," he added.

Mutual fund, which enable investors to pool their money and place it under professional investment management,are mainly of two types: closed and open-end.

While a closed-end fund offers only limited number of shares and puts the brake on issuing no new units after it is

launched, open-end does not have any curbs on the amount of shares to be issued.

If demand is high enough, the fund will continue to issue shares no matter how many investors there are. Open-end

funds also buy back shares when investors wish to sell.

The majority of the mutual funds now available in the world are open-end. By continuously selling and buying back

fund shares, these funds provide investors with a very useful and convenient investing tool.

Company officials said initial size of the Prime Finance First NRB (Non-Resident Bangladeshi) Unit Fund might be

increased depending on the demand and approval of the SEC.

Some 60 per cent of the Tk500 million fund will be sold to public and 20 per cent each for sponsors and private

placement. Face value of each unit will be Tk 100.

State-owned Investment Corporation of Bangladesh (ICB) will act as trustee and custodian of the fund.

Akter H Sannamat, managing director of the Prime Finance and Investment Limited (PFIL), the sponsor of the fund,

said they are confident that the country's first open-end mutual fund would be popular and a success.

"The size and number of the open-end mutual fund is increasing day by day across the world. It's a very popular

investing tool. It was launched in China in 2004 and has proved to be a big success," he said.

PFAMCL, also an offshoot of the PFIL that is launching the fund, said the SEC has already agreed in principle toapprove the fund.

"Objective of the fund is to tap into remittance of non-resident Bangladeshis. It will ensure long term returns," Moin

Al-Kashem, PFAMCL managing director and chief executive officer said.

He said the investors who'll purchase units either through private placement or public offer or subsequent purchase

from the asset management company will have option to receive their units in demated form to be deposited in their

BO (Beneficiary Owner) accounts.


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All the demated units of the fund to be sold through private placement and public offer will be listed with the stock

exchange after completion of public offer.

The units with demat option subsequently purchased will also be listed with the stock exchange every third day of

week.

The transaction of the units in the stock exchange will be done just like any other securities listed with the stockexchanges

Sandhani Life UF Growth

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