SECURITIES AND EXCHANGE COMMISSION

Public Issue of Securities:

Mutual Fund
Presented by
Md.Anowarul Islam,Executive Director/ Md.Mahmoodul Hoque, Director Securities and Exchange Commission

What is Mutual Fund ?

A

Mutual Fund is a professionally managed collective investment scheme that pools money from many investors and invests typically in securities (stocks, bonds, short term money market instruments, other mutual funds and other securities) on behalf of the investors/unit holders and distributes the profits.

In other words, a mutual fund allows an investor

to indirectly take a position in a basket of assets.

According to basic financial theory an investor can

reduce his risk by holding a portfolio of assets instead of only one asset. This is because by holding all your money in just one asset, the entire fortunes of your portfolio depends on this one asset. By creating a portfolio of a variety of assets, this risk is substantially reduced. Can mutual funds assumed to be risk-free investments? No. Mutual fund investments are not totally risk free. In fact, investing in mutual funds bears the same risk as investing in the equities, the only difference is that due to professional management of funds the controllable risks are substantially reduced.

What are the types of risks involved in investing in mutual funds?

A very important risk involved in mutual fund investments is the market risk. When the market is in doldrums, most of the equity funds will also experience a downturn. However, the company specific risks are largely eliminated due to professional fund management.

Professional Management :

Advantages of Investing Mutual Funds:

The basic advantage of funds is that, they are professionally managed, by well qualified professionals. Investors purchase funds because they do not have the time or the expertise to manage their own portfolio. A mutual fund is considered to be relatively less expensive way to make and monitor their investments.

Diversification
Purchasing units in a mutual fund instead of buying individual stocks or bonds, the investors risk is spread out and minimized up to certain extent. The idea behind diversification is to invest in a large number of assets so that a loss in any particular investment is minimized by gains in others.

Economies of Scale
Mutual fund buy and sell large amounts of securities at a time, thus help to reducing transaction costs, and help to bring down the average cost of the unit for their investors. Liquidity Just like an individual stock, mutual fund also allows investors to liquidate their holdings as and when they want. Simplicity

Investments in mutual fund is considered to be easy, compare to other available instruments in the market, and the minimum investment is small.

Mutual Fund scheme are evaluated?

Performance indicators are:

-total returns given by the fund on different schemes, -the returns on competing funds, -the objective of the fund and -the promoters image
These are some of the key factors to be considered while taking an investment decision regarding mutual funds.

Types of Mutual Fund

BY STRUCTURE Open- Ended Mutual Fund :
An open-end fund is one that is available for subscription all through the year. These do not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value ("NAV") related prices. The key feature of open-end schemes is liquidity.

Closed- Ended Mutual Fund :

A closed-end fund has a stipulated maturity period which generally ranging from 5 to 15 years. The fund is open for subscription only during a specified period. In this case ,the total size of the fund is limited by the size of the initial offer. This types of fund are always listed in the stock exchange for liquidity.

ypes of Mutual Fund (Contd)

Equity Mutual Fund Categories: Growth Fund Capital Appreciation Fund Growth and Income Fund International and Global Fund Specialty Fund Index Fund Fund of the Fund Bond Mutual Fund Categories: Income Fund Tax Free fund High-yield Bond Fund International and Global Bond Fund

Mutual Fund in Bangladesh

wmwKDwiwUR I GP Kwgkb (wgDPzqvj dv) wewagvjv, 2001 is the
main Rules for Mutual Fund in Bangladesh.

As per the wewagvjv definition of the Mutual Fund is,

wgDPzqvj dv A_ Uv AvKvi MwVZ Ggb Kvb dv hvnvi Dk GB wewagvjv Abymvi A_ evRvi BbgU wewbqvMi Rb GK ev GKvwaK xgi Aaxb RbmvaviYi wbKU BDwbU weqi gvag msMnxZ A_; Ges AvjvP wewagvjv Abyhvqx cZK wgDPzqvj dv Trust Act, 1882 (II of 1882) Gi Aaxb Uv AvKvi MVb KiZ ne Ges Registration Act, 1908 (XVI of 1908) Gi Aaxb Uv `wjj wbewZ nZ ne |

SL

Mutual Funds in Year Bangladesh Name of the Mutual of Floatation Face Value
Fund Closed End Mutual Funds 1st ICB 2nd ICB 3rd ICB 4th ICB 5th ICB 6th ICB 7th ICB 8th ICB 1st BSRS ICB AMCL 1st ICB AMCL Islamic ICB AMCL 1st NRB 1980 1984 1985 1986 1987 1988 1995 1996 1997 2003 2005 2007 100 100 100 100 100 100 100 100 100 100 100 100

Fund Size (TK in Crore)

01 02 03 04 05 06 07 08 09 10 11 12

Tk 0.75 Tk 0.50 Tk 1.00 Tk 1.00 Tk 1.50 Tk 5.00 Tk 3.00 Tk 5.00 Tk 5.00 Tk 10.00 Tk 10.00 Tk 10.00

Mutual Funds in Bangladesh (Contd)

SL 13 14 Name of the Mutual Fund ICB AMCL 2nd NRB AIMS 1st Guaranteed Year of Floatation 2008 2000 Face Value 100 1

Fund Size (TK in Crore) Tk 100.00 Tk 16.80

15
16 17

Grameen Mutual Fund One

Grameen Mutual Fund Two Prime Finance 1st

2005
2008 2009

10
10 10

Tk 17.00
Tk 125.00 Tk 20.00

18
19 20 21 22 23 24

EBL 1st
ICB AMCL 2nd ICB Employees Mutual Fund One:Scheme One Trust Bank 1st Prime Bank 1st ICB AMCL DBH 1st IFIC Bank 1st

2009
2009 2010 2010 2010 2010 2010

10
100 10 10 10 10 10

Tk 100.00
Tk 50.00 TK.75.00 Tk.200.00 Tk.100.00 Tk.120.00 Tk.120.00

Mutual Funds in Bangladesh (Contd)

SL 25 26 27 28 29 30 31 32 Name of the Mutual Fund Phoenix Finance 1st ICB AMCL 3rd NRB Janata Bank 1st GreenDelta Popular Life 1st IFIL 1st Islamic PHP 1st AIBL 1st Year of Floatation 2010 2010 2010 2010 2010 2010 2010 2011 Face Value 10 10 10 10 10 10 10 10 Fund Size (TK in Crore) Tk.60.00 Tk 100.00 Tk 200.00 Tk 150.00 Tk 200.00 Tk.100.00 Tk.200.00 Tk.100.00

Mutual Funds in Bangladesh (Contd)

Open-End Mutual Fund SL Name of the Fund Year of Floatation Initial Fund Size
(TK in Crore)

1
2 3 4

ICB Unit Certificate

ICB AMCL Unit Certificate ICB AMCL Pension Holders Unit Certificate Prime Financial Unit Fund

1981
2003 2004 2010

Tk 10.00
Tk 10.00 Tk 10.00 Tk 20.00

Formation of Mutual Fund

-

To launch a Mutual Fund following parties are required:

i) Sponsor ii) Trustee iii) Custodian iv) Asset Manager -Sponsor will appoint Trustee, Custodian and Asset Manager for the proposed Fund. Who Can be Sponsor of a Mutual Fund ?
-As per the wewa 2(1)(P) of the wmwKDwiwUR I GP Kwgkb (wgDPzqvj dv) wewagvjv, 2001; -Sponsor is a Bank, Finance or Insurance Company or Statutory Organization who singly or jointly can form a mutual fund with another Bank, Finance or Insurance Company, Statutory Organization Recognized Registered Trust Fund, Pension Fund, Provident Fund or Super Annuation Fund.

-There may be single or multiple sponsor for a Fund.

Who may be a Trustee of a Mutual Fund?

-Trustee of a Mutual Fund must be registered by the Commission under the wmwKDwiwUR I GP Kwgkb (wgDPzqvj dv) wewagvjv, 2001. -Currently there are 5(five) registered Trustees in the market. They are: 1) Investment Corporation of Bangladesh (ICB) and 2) Bangladesh General Insurance Company Ltd. (BGIC) 3) Sandhani Life Insurance Co. Ltd. 4) Brac Bank Ltd. 5) Eastern Bank Ltd. Who may be a Custodian of a Mutual Fund? - Custodian of a Mutual Fund must be registered by Commission under the wmwKDwiwUR I GP Kwgkb (wgDPzqvj dv) wewagvjv, 2001. -Currently there are 4(four) registered Custodian in the market. They are: 1) Investment Corporation of Bangladesh (ICB) and 2) Standard Chartered Bank (SCB) 3) Brac Bank Ltd. 4) Citibank N.A

Who may be the Asset Management Company of a Mutual Fund?

- An Asset Management Company of a Mutual Fund must be registered by
the Commission under the wmwKDwiwUR I GP Kwgkb (wgDPzqvj dv) wewagvjv, 2001. - Currently there are 11(eleven) registered Asset Management Companies in the market. They are: 1) ICB Asset Management Company Ltd. 2) Bangladesh Development Bank 3) Assets & Investment Management Services of Bangladesh Ltd. 4) RACE Management Private Company Ltd. 5) LR GLOBAL Bangladesh Asset Management Company Ltd. 6) Prime Finance Assets Management Company Ltd. 7) VIPB Asset Management Company Ltd. 8) Alif Asset Management Ltd. 9) National Asset Management Ltd. 10) InvestAsia Capital and Asset Management Limited. 11) Alliance Capital Asset Management Ltd.

1. wgDPzqvj dv Kvb Dk Kvb gqv`x FY ev AwMg c`vb Kwie bv|

wewbqvM evav-wbla(cg Zdwmj,wewa 56)

2. wgDPzqvj dvi Kvb GKK xgi gvU m`i kZKiv `k fvMi ewk Kvb GK Kvvbxi kqvi wewbqvM Kiv hvBe bv| 3. Kvb wgDPzqvj dv Dnvi mKj xgi Aaxb Kvb Kvvbxi cwikvwaZ g~jabi kZKiv cbi fvMi ewk wewbqvM Kwie bv| 4. Kvb wgDPzqvj dv Dnvi mKj xgi Aaxb Kvb GKK Kvvbxi ev Mci kqvi, wWevi I Ab vb wmwKDwiwUR gvU kZKiv wek fvMi ewk wewbqvM Kwie bv| 5. Kvb wgDPzqvj dv Dnvi mKj xgi Aaxb Kvb GKK wk kqvi, wWevi I Ab vb wmwKDwiwUR gvU m`i kZKiv cwuPk fvMi ewk wewbqvM Kwie bvt Ze kZ _vK h, h xg GK ev GKvwaK wk wewbqvM Kivi Dk MVb Kiv nBqvQ, Zvnvi GB weavb chvR nBe bv hw` GB gg GKwU NvlYv cmcvm `Iqv nBqv _vK| 6. Kvb wgDPzqvj dv GK xg nBZ Ab xg wewbqvM vbvi KwiZ cvwie, hw`(K)ZvwjKvf~ wmwKDwiwURi GBic vbvi cPwjZ evRvi g~j UwfwK Kiv nBqv _vK; (L)GBfve vbvwiZ wmwKDwiwUR h xg vbvi Kiv nBqvQ m xgi wewbqvM Dki mwnZ mvgmc~Y nq| 7. GKB m` eevcKi GK xg Ab xg wewbqvM Kiv A_ev avi `Iqv hvBe bv| 8. Kvb wgDP~qvj dvK wewbqvM Kwievi Rb Znwej avi KwiZ AbygwZ `Iqv nBe bv| 9. Kvb xgi cv_wgK Bmy eq H xg KZK msMnxZ Znweji kZKiv cuvP fvMi ekx nBe bv, hvi cwjZ LvZ Iqvix wefvRb cmcvm DjL KwiZ nBe| 10. 1 nBZ 9 AbyQ`i Kvb welq zb bv Kwiqv, Znweji cv_wgK Bmy eq Qvov gvU eq wnmve eli mvvwnK MocoZv bxU m`i kZKiv Pvi fvMi ekx PvR Kiv hvBe bv|

Valuation of Mutual Fund

-Funds valuation is done as per Net Asset Value (NAV) of a unit of a particular mutual fund according to the wmwKDwiwUR I GP Kwgkb (wgDPzqvj dv) wewagvjv,

2001

-NAV of a unit is the intrinsic value of a unit of a Mutual Fund.

As per the wewagvjv; NAV (Fund)= Value of the Total Asset of the Fund as on date-Total Liabilities of

the Fund as on date NAV (Per Unit)= Total NAV/ Number of Outstanding Units

Total Assets include the following [ wewa 60(1)(K) ]:

ndvRZ iwZ mKj wmwKDwiwURi g~j, eKKZ mKj wmwKDwiwURi g~j, nvZ I evsK

iwZ bM` UvKv, cvIbvhvM wmwKDwiwURi g~j, cvIbhvM wewbqvMi weq g~j, AvqKi ev` Av`vqhvM jfvsk, AvqKi ev` Av`vqhvM my`, Aemvqb LiP ev` Bmy LiP, Aemvqb LiP ev` gy`b I kbvix LiP|
c`qhvM mKj wmwKDwiwURi g~j, c`qhvM wewbqvMi q g~j, evKviR I ndvRZKvixi PvR, mKj aibi gy`b, cvewjKkb I kbvix LiP, eKqv wejw^Z LiP (Uvw wd, evwlK wd, AwWU wd, MvivwU Kwgkb)|

Total Liabilities include the following [ wewa 60(1)(L) ]:

Dividend of Mutual Fund

- The amount of total dividend to be declared for the year shall not be less than 70 (seventy) percent of the total net profit earned in the respective year.
- Dividend should be distributed among the unit

holders within 45(forty five) days of declaration.

Rights of the Unit Holder

-Dividend -Tax Benefit -Transferebility -Right to Vote -Reports and Accounts -Beneficial Interest

Question ?