Six-month wait and no payout yet for unitholders

Unitholders of Asian Tiger Sandhani Life Growth Fund have yet to receive their dues, even six months after the fund's closure, with uncertainty deepening as the delay drags on.

The trustee of the mutual fund said the payment could not be made earlier because it took time to secure regulatory approval of the fund's audit report. In addition, the issue of taxation on capital gains remains unresolved.

When contacted by The FE, the trustee-Bangladesh General Insurance Company (BGIC)-said unitholders were likely to receive their payments on Monday, as the securities regulator had already issued an instruction in this regard.

Later, however, BGIC said the disbursement would take longer, since the official procedure involving the Electronic Funds Transfer Network (EFTN) had yet to be completed.

Aggrieved by the delay, one of the more than 3,000 unitholders, Iftakharul Mahmud, questioned why investors would put money into such instruments if they could not get their funds back upon maturity.

Referring to the battered image of mutual funds due to scams and irregularities, he said, "The possibility of the mutual fund industry flourishing is very thin if investor trust cannot be restored through timely liquidation of funds and settlement of dues."

Asian Tiger Sandhani Life Growth Fund completed its 10-year tenure on March 10. According to securities rules, a trustee is required to liquidate a fund's assets and pay off unitholders' dues within three months of closure, subject to audit and regulatory approval.

BGIC officials explained the delays in detail. They said it had taken around 20 days to liquidate one of the fund's assets, one month for the auditor to complete its review, another 20 days to finalise the valuation, and one more month for the securities regulator to approve the audit report.

Md Abul Kalam, spokesperson for the Bangladesh Securities and Exchange Commission (BSEC), said the market watchdog had thoroughly scrutinised the audit report before approving it.

To resolve the issue of taxation on capital gains, BGIC Managing Director Saifuddin Ahmed said the trustee had written twice to the National Board of Revenue (NBR), in August and early September, seeking clarification on whether tax deductions were required before disbursement.

"But we are yet to receive any response," he added.

Unitholders will get back Tk 8.05 per unit, against the face value of Tk 10. While there is no capital gain for units purchased at face value, investors who bought at discounts during the fund's tenure may still have enjoyed gains.

The fund's net asset value (NAV) was Tk 8.17 per unit, declared on March 6. This means the final liquidation value fell 1.47 per cent from the NAV due to associated costs and a decline in asset values.

Although unitholders of the Growth Fund are likely to get their money soon, the unresolved taxation issue continues to pose a challenge for all closed-end funds, which BSEC officials warn could create barriers to future liquidations.

"The matter should be clarified by the revenue board," said Hasan Mahmud, executive director of the BSEC.

According to BGIC officials, the NBR has imposed a 10 per cent tax on capital gains for individual mutual fund investors and 15 per cent for institutional investors.

Earlier, during the liquidation of AIMs First MF, another closed-end fund, the trustee deducted tax by considering the face value as the purchase price, in line with NBR's instructions. BGIC was also the trustee of that fund.

At that time, AIMs First MF had an NAV of Tk 25.93 per unit, leading to an official calculation of Tk 15.93 per unit as capital gains, regardless of what unitholders originally paid.

By contrast, the Growth Fund has been liquidated below face value. While some investors who bought units at discounted prices may have gained, the trustee said it had no record of individual investors' purchase costs.

Return on investment

The Growth Fund, floated in early 2015, distributed a 7.5 per cent cash dividend in its first year. It later declared 13 per cent for FY16, 15.5 per cent for FY17, 12 per cent for FY18, 7.5 per cent for FY19, 15 per cent for FY21, and 5 per cent for FY22. It also issued reinvestment units (RIU) at 2.5 per cent in FY15.

Between December 7, 2023, and January 1, 2024, the fund traded above its Tk 10 face value. For the rest of its tenure, it traded below face value on the Dhaka Stock Exchange (DSE).

Insiders noted that investors who had purchased units at or above face value and held them until liquidation inevitably incurred losses.

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