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 Limited Face Value : Tk. 10 Offer Price: Tk. 10 Market 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, younger companies 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

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) were Tk. 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 of one 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 different growth 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.

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 NAV calculation. * Certain assets, such as goodwill (which broadly represents a companys ability to make future profits), are not necessarily 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 is more profitable for the shareholders to wind up the company than to continue operation.

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 clients towards 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 Funds
The 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 existing unit 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 Funds
Closed-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 fund through 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 deal
There are many Private equity deals are taken place in Bangladesh by both local and foreign investors. This type of deal requires preparation of 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 find capital 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

organized for its needs.

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.

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

MTB Unit Fund is an open-ended fund with an initial size of BDT 100 crore. Mutual Trust Bank Industry has provided Tk 20 crore industry. This encompasses scrutinizing Bangladesh General Insurance Limited analysis examines total value chain of anas the sponsor of the fund.the suppliers, customers, competitors etc. This data may be used to formulate a better strategy and be aware of potential threats. Company Limited is the trustee and BRAC Bank Limited is the custodian of the fund. As an open-ended fund, MTB Unit Fund will not be listed on the stock exchanges. Units of the fund, Financial management service initial subscription of which starts from April 15, 2012, will be sold from 115 sales centres of 21 sales agents across the country. These sales centres will make it easy for the investors to buy, sell or transfer their units without any a companys profitability may be washed away. Appropriate capital structure hassle. MTB Unit fund is the first open-ended fund Without proper financial management policy, a large portion of with only enhances profitability but also helps the business and comes to the marketaddition, properwhen the DSEplay a certificates in dematerialized form to assume appropriate level of risk. In at a time dividend policy can P/E not significant role to increase value of the company as well as price of a stock, if it is listed. ratio is hovering around 14. The sales agents were trained thoroughly about the product and also the sales and Conversion of legal status repurchase procedures as they will have to answer queries of the investors, accept application, repurchase or transfer forms and deliver necessary papers or cheques to them. According to the current law, a Private limited company with paid up capital BDT 40 crore into a Public limited Addressing the occasion, the sales agentsup capital limitmore than40 crore, those must be convertedtake any initiative to welcomed the new product and expressed their company. Though many Private companies crossed the paid of BDT companies didnt optimism PAMC the newlyprofessional advising service be able to attract the investors through its that provides launched unit fund will to help them complete the conversion successfully. convert. professional efficiency and large network of sales-centre
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. ICB Unit Fund PAMC can provide this company formation service as well as financial projection service

Introduction Sponsored by the Government of Bangladesh, ICB Unit Fund was established on April 10, 1981. Its main objective is to mobilize savings 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 and diversified 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 recorded and 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 stamp duty 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 and signed by the registered holders and no prior notice is required. The certificates are required to be surrendered at the prevailing Repurchase Price. Registration Number Units are issued as registered certificates. An existing Unit holder is required to mention the previous registration number on the specified 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 its fund 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 joint name (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 to institutions. Professional Counseling Professional Counseling is rendered to the prospective & existing investors who are eager to purchase ICB Units through ICB offices 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

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 be collected 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 of the Unit holders. It is also the custodian of all assets of the fund. Dividend The 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. Dividend Warrants are despatched soon after declaration of dividend. Since launching of the scheme in 1981 till FY 2004-05 the rates of yearly dividend declared/ paid are as under:

Financial Year 1980-81 1981-82 1982-83 1983-84 1984-85 1985-86 1986-87 1987-88 1988-89 1989-90 1990-91 1991-92 1992-93 1993-94 1994-95 1995-96

Rate of dividend per ICB unit Certificate(Tk.) 15.00 16.00 16.25 17.00 20.00 21.00 24.0 24.00 25.00 25.00 18.00 16.70 17.00 17.40 17.50 17.00

Financial Year 1996-97 1997-98 1998-99 1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

Rate of dividend per unit (Tk.) 17.50 14.00 12.00 12.00 12.00 12.30 12.30 11.50 12.00 12.00 13.00 20.00 22.00 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 warrants are 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 Bank Ltd., 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 and repurchasing 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

investor may derive personal benefit on the one hand and also contribute towards the economic development of the country on the other.
For further information, please contact :

Importance of MF

Before investing, whether it's in mutual funds or gold, the first thing you must do is research how the particular financial instrument is doing in the market and what it's future prospectus is. There are two main types of research. One simply consists of studying trends online and reading what the experts have to say. The other is more involved and consists of more direct hands on research of the various sectors with which your particular investment is involved. Most amateur traders will choose the first option. Mutual funds are conglomerations of stocks and bonds and therefore their prospectus depends on how well the individual investments are doing. Fees can of course also make a difference and all related charges associated with a mutual fund must also be considered. Fees for mutual funds are classified as end load, front load and no load. Through proper research, you will become informed of what types of fees are involved and whether or not they are worth what you can expect out of the investment. At the very minim, when investing in a mutual fund you should know the category of investments it focuses on, the asset value, the management strategy, the risk level of the assets involved, and the funds relationship with the overall stock market outlook. As long as you are well versed in these areas, the rest is just icing on the cake as long as you have chosen a well managed fund. Considerations for mutual fund categories include goals and objectives, classification of securities in the fund and likely return expected for each category. Of all the important factors when choosing a mutual fund, category is likely the most important. Research should be conducted using as long a history as is available. All financial instruments fluctuate greatly from one day to another but the important thing is how they perform over the long term. Try to couple this history with the time period you plan on investing since trends seem to run ii n cycles. Just because a fund isn't currently in the top 10 percent of earners doesn't mean that it's not an extremely lucrative fund over the long term. Don't forget to also check the individual histories of the stocks or other instruments in which the fund is invested. Like any investment, mutual funds require careful planning. Overall, the strategy is pretty much the same regardless of what type of investment you are making, but due to their nature mutual funds require a slightly different form of research.

AIMS FIRST A pioneering initiative was undertaken by some enthusiastic local and expatriate Bangladeshis to organize and float the first Mutual Fund in independent Bangladesh under private initiative. A company for this purpose was registered as Asset & Investment Management Services of Bangladesh Limited (popularly known as AIMS of Bangladesh) in December 1998, which emerged as the first purpose -built private

asset management company of the country. The company was formally inaugurated on August 29, 1999 by the Finance Minister and remained as the only one of its kind for the next decade in Bangladesh. Our maiden venture, AIMS First Guaranteed Mutual Fund, a closed end balanced fund, obtained approval 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 history of the capital market in Bangladesh. It was the first step of a long journey and there was no looking back. In a short time AIMS positioned itself at home and abroad as a proactive research oriented and knowledge based financial advisory and services manager as well as solution provider, specializing in diagnostic analysis, 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 as the Fund Manager of the internationally acclaimed Grameen Bank for the first mutual fund sponsored by it as well as advising BRAC, the largest NGO in the world, on feasibility of the securitization of their micro-credit receivables in a pioneering attempt. We have thrived under challenge and excelled in venturing into hitherto unexplored grounds and are committed to continue doing so to the satisfaction of our clients, patrons and friends...

AIMS FIRST GUARANTEED MUTUAL FUND

AIMS of Bangladesh conceived the idea and launched the Tk70 million pioneering first mutual fund in Bangladesh under private initiative the AIMS First Guaranteed Mutual Fund in year 2000 with a five year initial tenure, as the Asset Manager. Initially the size was contemplated at Tk50 million only but owing to unprecedented 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 every segment of the local financial sector, which played a pioneering role in developing a matured investment culture in the country. The proud Sponsors are IDLC Finance L:imited (formerly IDLC of Bangladesh Limited), IPDC of Bangladesh Limited, Southeast Bank Limited, Uttara Finance & Investments Limited, Pangaea Partners (BD) Limited, Sandhani Life Insurance Company Limited, Sandhani Credit Cooperative Society Limited and Bangladesh Industrial Finance Company Limited. The size of the fund was later increased to Tk140 million by the enthusiastic general unit-holders and the life extended by another ten years 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 isuing 70% bonus and 130% right to the unitholders. Bangladesh General Insurance Company Limited, the first general 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-end fund has a unique capital guarantee feature, hitherto unknown in the local market. It is listed at the Dhaka and 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

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 accepted practice. 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%

(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 recent years. 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)

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 to approve 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.

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 stock exchanges