Internship report On Capital Asset Pricing Model (CAPM) Analysis Based On Cement Companies

Submitted By: Md. Fozlul Haque ID: 082034025 Submitted To: Presidency University Dhaka Course Code: INT-495 of BBA Program Supervisor: Annesha Zeheen Lecturer M.H.School of Busines Presidency University

Date of Submission: 10, September 2012.

Declaration

I,do the hereby declar that the dissertation Analysis of Capital Asset Pricing Model (CAPM) submitted to the Presidency University for completion of the Course Code No INT-495.This is an original work of mine.No part of it,in any from , has been submitted to any University or Institute for any degree, diploma or for other similar purpose.

Md. Fozlul Haque ID: 082034025 Presidency University

Date: 10September, 2012

CERTIFICATE

I have the pleasure to certify that the dissertation Analysis of Capital Asset Pricing Model (CAPM) has been prepared under my supervision and guidance. To the best of my knoledge, it is the reasearchers orginal work. I certif that I have the draft and final hand written version of the dissertation and now Iapprove it for submission to the Presidency University Bangladesh as a partial fulfillment of the requirments for the completion of the code no INT-495

NAME OF SUPERVISOR

Annesha Zeheen Lecturer M.H.School of Busines Presidency University

Recommendation by supervisor

This is to certify,that the intership report entiled Capital Asset Pricing Model (CAPM) is done by Md. Fozlul Haque ID # 082034025, a student of Bachelor of business Administration (BBA) Program from the Department of Finances, Faculty of Business Administration, Presidency University,Dhaka under my supervisition. This report can be submitted for evalution. I wish him success in his future research.

Annesha Zeheen Lecturer

M.H.School of Busines Presidency University

Letter of Transmittal

August 10, 2011 To Mr.Syed Sajid Husain, Chief Executive Officer (Current charge), Chittagong Stock Exchange Ltd. Eunoos Trade Center (level-15)52-53 Dilkusha C/A, Dhaka-1000 Subject: Submission of Internship Report. Dear Sir, It is my great pleasure to submit you my internship report on the title of Problems and Prospects of Demutualization of for the Stock Exchanges of Bangladesh .I tried my best to complete this report properly for your kind considerration. I have confident that the internship program has increased both of my practical experience and theoretical knowledge to a great extent. I will be obliged to answer any query that may arise during the performance of this report. So I fervent requesting and hope that you would be kind enough to accept my report and oblige thereby. Thanking you. Sincerely Yours,

. Md. Fozlul Haque

BBA ID#082034025 Department of Finance Presidency University

Acknowledgement

My profound gratitude goes to almighty of Allah for given such patience and power for completing this report smoothly.

Special thanks for are due to my honorable supervisor Annesha Zeheen Lecture, Department of finance, Faculty of Business Studies, Presidency University, Dhaka, for his invaluable support, supervission, encouragement and useful suggestion throughout this report.Her moral support and contnuous guidance enabled us to complete our work successfully. I would like to express my heart felt thanks to Mr.Syed Sajid Husain, Chief Executive Officer (current Charge),Mr. Ghulam Faruque, Deputy General Manager, Mr. Md. Nasir Uddin,Senior Officer(Compliance & Monitoring), I would like to thanks Rahi Iftekhar Reja. I would also express my heartiest thanks to Professor Muhammad Mahboob Ali Head, M.H. School of Business Presidency University, Dhaka.

Executive Summary
The focus of this internship report brief history of Bangladesh stock market including Dhaka stock Exchange and Chittagong Stock Exchange. Specially focus on Chittagong Stock Exchange. In the analysis part of the report analysis the Capital Asset Pricing Model (CAPM) based on the five cement companies Aramit Cement, Meghna Cement, Lafarge Surma Cement, Heidelberg Cement and Confidence Cement. In finance, the capital asset pricing model (CAPM) is used to determine a theoretically appropriate required rate of return of an asset. The model takes into account the asset's sensitivity to non-diversifiable risk (also known as systematic risk or market risk), often represented by the quantity beta () in the financial industry, as well as the expected return of the market and the expected return of a theoretical risk-free asset. The CAPM is a model for pricing an individual security or portfolio. For individual securities, we make use of the security market line (SML) and its relation to expected return and systematic risk (beta).

The SML essentially graphs the results from the capital asset pricing model (CAPM) formula. The x-axis represents the risk (beta), and the y-axis represents the expected return. The market risk premium is determined from the slope of the SML.

Once the required rate of return, is calculated using CAPM, we can compare this required rate of return to the asset's estimated rate of return over a specific investment. . If the estimated price is higher than the CAPM valuation, then the asset is undervalued (and overvalued when the estimated price is below the CAPM valuation).

Finally we got a result that Meghna Cement and LAFARGE SURMA CEMENT LIMITED (LAFSURCEML) is proper valued in present stock market. And Aramit Cement and Confidence cement is undervalued. Another Heidelberg Cement is overvalued.

Chapter- One
SHORT NOTE OF STOCK MARKET IN BANGLADESH

A short note of stock market

The primary market is where capital is actually raised by the company selling stock to investors. Company in a separate arena from the stock market performs the capital raising function. The stock exchange is a trading vehicle place where buyers and sellers are brought together. All profits and losses go directly to the investors, less commissions and fees. The stock market is structured t provide liquidity and marketability to the securities industry. It is a worldwide system designed to bring buyers and sellers together. Company owners and stockholders, whether part of management, venture capitalists or investors, need a way of turning their stock certificates back into cash. The stock market provides this opportunity. It is this kind of liquidity that makes investing in stocks attractive. Stock prices are set by supply and demand. It is an auction market, where investors, through their intermediaries-brokers bid for stock at a price they feel is fair at the time. The market provides a ready market for stocks. With a simple phone call, an investor can buy or sell stock, virtually in minutes. The stock market is an essential part of capital market. The economy of a country largely relies on a strong capital market supported by a vibrant stock market. Contribution of any stock exchange generally leads to the economic growth by stimulating the funds to finance industry and other enterprises and changing the savings to industries and other productive activities. The existence of a stock market facilitates listed companies to raise additional capital quickly and cheaply as they enjoy reputation.

Background of Stock Market in Bangladesh

The necessity of establishing a stock exchange in the then East Pakistan was first decided prohibited by the government when, early in 1952, it was learnt that the Calcutta Stock Exchange had the transactions in pakistani shares and securities. The provincial industrial advisory council soon thereafter set up an organizing committee for the formation of a stock exchange in East Pakistan. A decisive step was taken the second meeting of the organizing committee held on the 13th march, 1953. In the cabinet room, Eden building, under the chairmanship of Mr. A. Khaleeli, secretary government of East Bengal, commerce, labor and industries department at which various aspects of the issue were discussed in detail. Then the central governments proposal regarding the Karachi The necessity Stock Exchange opening a branch at

Dhaka did not find favour with the meeting who felt that East Pakistan should have an independent stock exchange. It was suggested that Dhaka Narayanganj Chamber of Commerce & Industry should approach its members for purchase of membership cards at RS.2000 each for the proposed stock exchange. The location of the exchange it was thought should be Dhaka, Narayanganj or Chittagong. An organizing committee was appointed consisting of leading commercial and industrial personalities of the province with Mr. Mehdi Ispahani as the convener in order to organize the exchange. The chamber informed its members and members of its affiliated associations of the proceedings of the above meeting, requesting them to intimate whether they were interested in joining the proposed stock exchange. This was followed by a meeting, at the chamber of about 100 persons interested in the formation of the exchange on 07.07.1953. The meeting invited 8 gentlemen to become promoters of the exchange with Mr. M Mehdi Ispahani as the convener and authorized them to draw up the memorandum and article of association of the exchange and proceed to obtain register under the companys act.1913. The other 7 promoters of the exchange were Mr. J M Addision-Scott, Mr. Mhodammed Hanif, Mr. A C Jain, Mr. A K Khan, Mr. M Shabbir Ahmed and Mr. Sakhawat Hossin. It was also decided that membership fee was to be RS.2000 and subscription rate at 15 per month. The exchange was to consist of not more than 150 members. A meeting of the promoters was held at the chamber on 03.09.1953 when it was decided to appoint Orr Dignam & Co., solicitors to draw up the memorandum and articles of association of the stock exchange based on the rules of stock exchange existing in other countries and taking into account local conditions. The 8 promoters incorporated the formation as the East Pakistan Stock Exchange Association Ltd. on 28.04.1954. As public company, on 23.06.1962 the name was revised to East Pakistan Stock Exchange Ltd. Again on 14.05.1964 the name of East Pakistan Stock Exchange Limited was changed to "Dhaka Stock Exchange Ltd." Although incorporated in 1954, the formal trading was started in 1956 at Narayanganj after obtaining the certificates of commencement of business. But in 1958 it was shifted to Dhaka and started functioning at the Narayangonj Chamber Building in Motijheel C/A. On 1.10.1957 the stock exchange purchase a land measuring 8.75 kattah at 9F Motijheel C/A from the government and shifted the stock exchange to its own location in 1959.

Chapter TWO
BASIC INFORMATITION ABOUT CHITTAGONG STOCK EXCHANGE

Abou t Ch it t agon g St ock Ex ch an ge (CSE)

a. Background The Chittagong Stock Exchange (CSE) began its journey in 10th October of 1995 from Chittagong City through the cry-out trading system with the promise to create a state-of-the art bourse in the country. Founder members of the proposed Chittagong Stock Exchange approached the Bangladesh Government in January 1995 and obtained the permission of the Securities and Exchange Commission on February 12, 1995 for establishing the country's second stock exchange. The Exchange comprised of twelve Board members, presided by Mr. Amir Khosru Mahmud Chowdhury (MP) and run by an independent secretariat from the very first day of its inception. CSE was formally opened by then Honorable Prime Minister of Bangladesh on November 4, 1995. A nationwide user-friendly central depository system (CDS) has also been brought into. At CSEs taking the first stem, securities and exchange commissions of Bangladesh has formed a committee to develop an appropriate legal framework for the central depository system. Considering the important role of CSE on the development of capital market of Bangladesh, an attempt has been fabricated in this paper to study the simultaneous practices of stock trading in Chittagong by CSE. Although various research worker had been fabricated about various topics of CSE, a very few have been taken to analyze the overall operational accomplishment and the profitability of Chittagong stock exchange (CSE). The stock market is an essential part of capital market. The economy of a country largely relies on a strong capital market supported by a vibrant stock market. Contribution of any stock exchange generally leads to the economic growth by stimulating the funds to finance industry and other enterprises and changing the savings to industries and other productive activities. The existence of a stock market facilitates listed companies to raise additional

capital quickly and cheaply as they enjoy reputation. Bangladesh emerged as an independent country in the year 1971. But till now, the industrial development of Bangladesh is still insolvent and for swift industrialization, formation of capital is the most significant component. But it is easy to procure through capital market with proper support of stock market. Bangladesh stock market has seen a rapid growth in the recent years. Initial public offerings (IPO) are increasing and foreigners are also increasingly showing interest responding to the governmental policies and development in the stock exchanges. At present, there are two stock exchanges, in both the exchanges, trading is done through automation system- a new technologically developed system for stock trading. By introducing this system, both the exchanges increased their role in the overall development of capital market or the country. The Chittagong stock exchange (CSE) has been established in 1995 as model of international standard. A complete automation project of CSE is on full sway. B.Board of Directors Chittagong Stock Exchange Ltd. (CSE) has 24 members, of whom 12 are elected and 12 are non-elected. This Board comprises of one President, three Vice Presidents and 19 Directors. There is a Chief Executive Officer (CEO
Sl. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Name of the Dire ctors Mr. Al Maruf Khan,FCA Mr. Mirza Salman Ispahani Mr. M.K.M. Mohiuddin Mr. Tareq Kamal Mr. Abu Sayed Md. Shahidullah Mr. ASM Nayeem,FC A, FCCA Mr. Bijan Chakroborty Mr. Fakhor Uddin Ali Ahmed Mr. Md. Mofizuddin Mr. Mohammed Mohiuddin, FCMA Mr. Nasiruddin Ahamed Chowdhury Mr. Shahjada Mahmud Chaudhuri Mr. Abdus Salam Dr. Abul K. A. Mubin Mr. A.K. Azad Mr. C.M. Shafi Sami Mr. Kutubuddin Ahamed Professor Md. Salim Uddin Dr. Moinul Islam Mahmud Ms. Parveen Mahmud Architect Taslim Uddin Chowdhury Mr. Syed Sajid Husain D esignation President Vice -President Vice -President Vice -President Director Director Director Director Director Director Director Director Director Director Director Director Director Director Director Director Director CEO & Director

C. Milestones 12th February 1995 Received approval of Bangladesh Government 1st April 1995 Incorporated as a limited company 10th October 1995 Introduced Floor Trading Became corresponding member of World 1st January 1996 Federation of Exchanges (Former FIBV) 2nd June 1998 Introduced Automated Trading on WAN 16th January 2000 Convened South Asian Federation of Exchange (SAFE) 26th January, 2004 Central Depository Bangladesh Ltd. (CDBL) formed 30th May, 2004 Internet Trading Service launched (ITS) 4th July, 2004 Introduced Over-the-Counter (OTC) market 14th July, 2004 CSE initiates the idea of Securities Institute by raising formal proposal 14th Dec, 2005 Organises Capital Market Fair- First of its kind in the country Introduced Comprehensive Training Program on Stock Market for 10th March, 2007 investors, professionals and others. First of its kind in the country Submission to SEC of draft Regulatory Framework on Financial 12th June, 2007 Derivatives 18 October, 2008 CSE became a member of OIC Member States' Stock Exchange Forum CSE signed a contract with Millennium IT Software Ltd. and Polaris 28 Nov, 2010 13 Jan, 2011 11 Sep, 2011 20 October,2011 Software Lab Ltd for Next Generation Trading System (NGTS) Execution of trade of Short Sell under the Regulations Signing of agreement for launching electronic fund transfer through Bangladesh Electronic Fund Transfer Network (BEFTN) Introduced Next Generation Trading System (NGTS) and the new website

d. Mission & vision Mission The mission of the CSE is to create on effective, efficient and transparent market of international standard to save and invest in Bangladesh in order to facilitate the competent entrepreneur to raise capital and accelerate industrial growth for overall benefit of the economy.

The Chittagong Stock Exchange believes that a dynamic, automated, transparent stock exchange is needed in Bangladesh. It works towards an effective, efficient and transparent market of international standard to serve and invest in Bangladesh in order to facilitate the competent entrepreneurs to raise capital and accelerate industrial growth for overall benefit of the economy and keep pace with the global advancements.

Vision:
The visions of CSE are as follows: To develop a strong platform for raising capital To provide an investment opportunities for the investor To develop membership a corporate culture through mandatory corporate

To develop a transparent market ensuring investors interest To expand the capital market To collect, preserve and disseminate data and information on stock market To provide a fully automated trading, clearing and settlement system to ensure quick, easy, accurate and easily accessible to all transactions To make interest about Bangladesh stock market for the non-resident Bangladeshis to invest in this market To develop a research sell for analyzing status of the market and economy To attract the investors for getting membership of SEC To ensure smooth customer service and truncation To achieve goodwill Total necessary steps for increasing customers.

Objective & Core value of CSE

Objectives Develop a strong platform for entrepreneurs raising capital; Provide a fully automated trading system with most modern amenities to ensure: quick, easy, accurate transactions and easily accessible to all;

Undertake any business relating to the Stock Exchange, such as a clearing house, securities depository center or similar activities; Develop a professional service culture through mandatory corporate membership; Provide an investment opportunity for small and large investors; Attract non-resident Bangladeshis to invest in Bangladesh stock market; Collect preserve and disseminate data and information on stock exchange; Develop a research cell for analyzing status of the market and economy.

Core value
Value for people Transparency Excellence Harmony Commitment Integrity

e. Legal base of cse

As legal entity CSE is a not-for-profit public limited company. All of its 129 members are corporate bodies. It has a separate secretariat independent of policymaking Board. The Board comprises of brokers and non-brokers directors with equal proportion to ensure the transparency. The Board constituted Committees to delegate such functions and authority as it may deem fit. There is an independent secretariat headed by a full time Chief Executive Officer. CSE activities are regulated by its own regulations and bye laws along with the rules, orders and notification of the SEC.

f. REGULATORY STRUCTURE OVERVIEW

g. ORGANISATION STRUCTURE

h. Management
The CEO is responsible for implementing the decisions of the Board, the day to day running of the exchange and formulating strategic plans for agreement with the board. Following are the functions of the CEO and the various Departments of CSE:

I. Corporate Department
This department carries out the following functions: Maintain library contents Press cuttings and press relations

Produce portfolio and other CSE publications Public relations Investor's information cell

Clearing Settlement
Clearing, Settlement & DP: This department is responsible for: Delivering cheques and shares to members File and withdraw stock from vault Deal with bad delivery procedures Manage security receive shares from members Opening of BO accounts and provide other depository services

CSE Clearing House

CSE provide settlement and clearing services for members through the Clearing House. The Clearing House provides the members and the CDBL each members settlement obligations i.e. what counter parties owe and what counter parties are due to receive on the settlement date after the trading period is over. It acts as a common agent between members by delivering and receiving their securities and cheques. The Clearing House also handles failed trade, bad delivery, auction settlement etc. CSE setlement system

Systems: The Systems Department carries out the following

functions: Deal with user queries Manage communication network

Manage information technology developments and suppliers Manage internal information technology awareness Manage trading and operate Clearing & Settlement System Maintain master file Print daily reports and produce statistics Support internal users and setup and train new system users

Market Operation
This department carries out the following functions: Monitor public information Monitor, receive and disseminate regular company information On-line surveillance Inspection visits to members Receive and disseminate price sensitive company information Receive and manage investor complaints Receive and manage other complaints Manage and monitor OTC facilities

Finance & Administration: This department is responsible for

the following: Conducting statutory and management meetings of the company and provide secretarial services relating thereto Prepare Annual and periodic Financial Statements Prepare Budgets and monitor the income and expenditure with the budget Controlling banking operations of the company Keeping inventory of the assets of the company Managing financial settlement of the trading operations Provide MIS to concerned departments Payments to different party bills after due verification

Preparation of payroll of confirmed and casual staff Compliance of taxation rules and policies including withholdings, payments and filing of tax returns and documents Issuing certificates to brokers and other authorities Maintaining IPF(Investors Protection Fund) Accounts Oversee the development activities of the Exchange including acquisition and development of properties, schedule payments and coordinate associated activities department carries out the following functions: Maintain library contents Press cuttings and press relations Produce portfolio and other CSE publications Public relations Investor's information cell Iding support to develop and implement corporate strategies.

Research, Corporate Development & Information: This

Chapter -Three
TRADING SYSTEM

Trading System
The Chittagong Stock Exchange was the first stock exchange in the country to introduce automated trading system on June 1999. The trading system at CSE known as CHITTRA connected major cities of Bangladesh enabling all members to trade nation wide simultaneously with ease and efficiency.

InternateTrading Services
CSE is not only the pioneer of establishment of nationwide trading mechanism. It also extended its network to the abroad by introducing Internet Trading System on 30th May 2004. You may have access to our trading network not only from the premises of our brokers but also from personal computers in your home through the Internet. Internet trading is available on CSE. The CSE network allows its user to use internet as an order routing system for communicating clients orders to the CHITTRA through brokers. Broker can provide this service to their client after obtaining permission from respective stock exchanges. CSE has stipulated the minimum conditions to be fulfilled by brokers to start Internet based trading services.

Procedure for Internet Trading Agreement with a Broker:

As an individual investor you need to open an account with a broker. When you are willing to use Internet Trading Facilities, you will need to fill in a special ITS Account Opening Form. The Terms and Conditions to be followed by you and your broker for ITS, will be little different from the regular trading account. All the Brokers are not eligible for ITS. Please see in the relevant section of this website or email to us for a list of brokers who can offer you ITS. Although the form is available on the net, you still need to fill in and submit to the chosen broker a hard copy of the form duly filled in.

Passwords
When you open an account, your broker will prepare your electronic file. Your profile will be accessible by you only. Your Login Id and Password are those that you provided in your Registration Form. We strongly recommend you to change your password immediately and from time to time for better security.

And remember the password when you change it.DO NOT DISCLOSE YOUR PASSWORD TO ANYBODY. Remember, if you give your password willingly or unwillingly, he or she can place order and nobody but yourself will be liable for all those transaction.

Deposits with your brokers and your trade limit

Make sure that you and your Broker have signed the Safe Keeping Agreement. Once you have the Safe keeping agreement, you can deposit shares and money to your Broker. According to your deposit, the Broker will set limit of your trade. You may either have a Cash Account or a Margin Account. Consult your broker before you choose.

Cash Account and Margin Account

If you have a CASH account, brokers may set limit to the extent you deposit. For Margin account the Margin Rules 1999 will be applicable.

Placing your order

Your orders placed through this system, if passes the validation test will be forwarded to the CSE Trading engine. In the trading engine, orders are matched on price and time priority. ITS is not accepting any market order. All submitted orders have to be limit order.

Execution of Trade
Once you place order in the CSE Trading Engine, it will be queued to be matched with another opposite order according to the Chittagong Stock Exchange Trading Regulations 1998.

Trade Confirmation
When your order is matched with another order, i.e., trade is executed, you will receive a confirmation note on e-mail. The email will be generated by the computerized system and will not require any signature.

Post Trade Settlement

Your Broker will receive a consolidated report from the Exchange of your buy and sell at the end of business. It is the responsibility of the Broker to settle for you.

Check your position - your own index

The ITS is not only a system to check market and place order. You will also be able to see current value of your stock. CSE ITS will give you opportunity to have your Personal Index.

Collection of money and share certificates from your brokers Safe Keeping service of your Brokers
Your Broker is bound to make settlement to you by delivery of good securities and/or payment by cheque "good for payment within one day of its receipt of securities and/or cheque from the Clearing House. You may keep a provision in your Safe Keeping Service Agreement for the arrangement of the share and money collected by your Broker.

Settlement System

Categ ory A

Criteria

Settlem Settlem ent ent System Cycle Netting for payment Pay in day = T+1 obligation and trade Pay out day = T+3 for trade for securities obligation

G N

Regular AGM, Declared and paid Dividend less than 10% and Submission of the compliance Report to SEC within the time limit Greenfield companies

Trade for Trade for Pay in day = T+ 1 both securities & Pay out day=T+3 money obligation

Trade both money All newly listed Trade companies except both Greenfield companies money

for Trade for Pay in day = T+ 1 securities & Pay out day=T+3 obligation for Trade for Pay in day = T+ 1 securities & Pay out day=T+3 obligation

Irregular AGM or Trade for Trade for Pay in day = T+3 Declared no dividend at both securities & Pay out day = T+7 all or declared dividend money obligation but failed to pay it off or Submission of the requisite compliance report to SEC within the time limit or Not in

operation for six months, or Accumulated loss after adjustment of reserve, if any, is negative and exceeded its paid-up capital excluding those who declared dividend. Pay and pay out day for Spot order transactions of all categories of companies are T+0 and T+1 respectively. Direct settlement of foreign buyer and/seller shall be within T+5 and intimation thereof to CSE within T+6 [Notes: T stands for Trading day;]

In terms of the matching process, there are two methods:

1. Orders are sorted and matched with opposite orders of the best price. Waiting orders are automatically in the following sequence keeping the system fair and transparent: Best Price Within Price, by time priority.

The best buy order will match with the best sell order. The best buy order for a seller is the one with highest price and the best sell order for a buyer is the one with lowest price. An order may match partially with another order resulting in multiple trades.

Order Matching Mechanism

2. Orders are queued for matching at a specified time at a single price. Subsequent to matching, trade confirmations are sent to the respective workstations, which can be printed on-line. The system displays scrip and market-related information required to support traders.

Trading Orders
JCSE trading system provides immense flexibility to the investors in terms of kinds of orders that can be placed to trade. The system allows the user to modify or cancel an order prior to execution.

The most frequently order on the CSE is the "limit order, which is an order to buy or sell at a specific price. Conditions related to time can be easily made into a limit order, which are as follows

Good Till Cancelled GTC:

A GTC order is the order that remains in the system for a period not exceeding one calendar week or the member cancels it.

Good For Day:

A GFD is the order, which is valid for the day on which it is entered. If the order is not matched during the day, the order gets cancelled automatically at the end of the trading day.

Good Till Date:

A GTD order allows the member to specify the number of days not exceeding one calendar week for which the order shall stay in the stay in the system. At the end of this period the order shall be deleted from the system.

In addition to limit order, the Exchange has introduced other following types of orders for the investors: Market order
Market Order is an order to buy or sell a certain quantity of particular security at the best price or prices prevailing in the market at that point of time.

Drip Feed Order

A Drip Feed Order is an order in which the member has the option to specify a replenish quantity along with the total order quantity.

Stop Loss Order

A Stop Loss Order allows the member to place an order, which gets activated only when the market price of the relevant security reaches or crosses trigger price. A stop loss order can be modified or deleted until it is not converted to a limit order.

Match at Closing Price Order

A Match at Closing Price Order allows the Member to specify order to be executed at Closing Price.

Spot Order
Members shall be allowed to carry out spot order on CSE system arising out of closure of book or closure of the renunciation period of listed Companies. A spot order is traded against another spot order only.

Odd Lot Order

Any share quantity, which is not a market lot or multiple of market lots, shall be called Odd Lot. While matching the system would match orders only if the quantity (odd) of the order is fully satisfied by one of the opposite order.

Bulk lot order

Bulk lot orders are multiple of market lot orders, which contain multiple numbers of certificates. Each of the Bulk lot order shall match with equal quantity and best price. The minimum amount for a bid of bulk lot for a certain security shall be Tk 0.5 (point five) million at market price unless otherwise fixed by the Board time to time with the approval of the SEC.

Big Lot Order

Big lots are multiple of market lots inscribed in one single certificate. Each of the big lot order shall match with equal quantity and equal or better price.

Auction Order
Auction Order shall be an order entered by CSE. The Exchange will specify a rate with price brand for each security when putting the auction order. The auction orders entered by CSE cannot be modified or deleted once the auction session has started.

Trading hours
The trade takes place from Monday to Friday except holidays declared in advance by the Exchange. The market timings of normal trading session are: Market Open: 09:40 hours Market Closed: 14:30 hours

Failed Trades:
If a member fails to deliver securities or make payment on the settlement day, the stock exchange automatically auctioned the unsettled transaction on the risk and account of the defaulting member. No prior notice is given. The defaulting member is not allowed to carry out trading from the day after settlement day until payment of the outstanding money and a fine as decided by CSE

Chapter-4
OPENING & CLOSING PRICE CALCULATION &MARGIN REQUIREMEN WITH CSE

Opening & Closing price Calculation:

The opening price of a security shall be the price at which maximum number of securities is matched in opening session.

Computation of closing price of scripts

The closing prices of scripts are computed on the basis of weighted average price of all trades in the last 30 minutes of the continuous trading session. However, if there is no trade during the last 30 minutes, the weighted average price of maximum 50 (fifty) number of trades preceding the above 30(thirty) minutes shall be taken for determination of closing price. In case there is no trade in the security during the continuous trading session the opening price of the security shall be treated as the closing price.

Computation of closing price of scripts

The closing prices of scripts are computed on the basis of weighted average price of all trades in the last 30 minutes of the continuous trading session. However, if there is no trade during the last 30 minutes, the weighted average price of maximum 50 (fifty) number of trades preceding the above 30(thirty) minutes shall be taken for determination of closing price. In case there is no trade in the security during the continuous trading session the opening price of the security shall be treated as the closing price. The following standard upward and downward price limits are applicable for A B G & N category companies for each market days

Previous days per Limits share market price 01. Up to Tk. 200 20% (Twenty Percent ) but not exceeding Tk.35 02. Tk.201 to Tk.500 17.5% (Seventeen Point Five Percent ) but not exceeding Tk.75 03. Tk.501 to Tk. 1000 15% (Fifteen Percent ) but not exceeding Tk.125 04. Tk.1001 to Tk. 2000 12.5% (Twelve Point Five Percent ) but not exceeding Tk.200 05. Tk.2001 to Tk.5000 10% (Ten Percent ) but not exceeding Tk.375 06. Tk.5001 and above 7.5% (Seven Point Five Percent ) but not exceeding Tk.600

However the above price limit will not be applicable in the following cases: There is no price limit for Z category companies. Free trade of Z category is allowed for each market day. However, for Z category shares Circuit Filter @10% is applicable and the circuit filter is calculated on the basis of last traded price of the shares of this category during trading hours A newly listed securities is allowed for free trade for first 5(five) consecutive market days. Free trade is also allowed on the subsequent trading day of receiving price sensitive information like rights issue, bonus issue and dividend from the listed company. After the day, the price limit will be applicable as usually. Free trade is allowed on the first trading day subsequent to the record date from 12.00 noon to the rest of the trading hours of the day due to closure of transaction resulting from record date/book closure date.

Margin requirement with CSE

The CSE put in place a comprehensive risk management system, which is constantly monitored to pre-empt any trading failures. It collects margins from members to address the problems related to the volatile trading activities as well as to settlement failure. CSE imposes margin requirements on the members additional trade exposure. Additional trade exposure means the amount of the aggregate (gross) trade exposure exceeding the free limit for each member. Aggregate

(gross) trade exposure is computed on the total buys and total sales position of a member at any point of time during a trading day. The free limit on the amount of the gross trade exposure to trade in CSE is taka one crore per trading day. The member shall pay the margins in cash, bank guarantee or FDRs etc. within one hour of exceeding the free limit on the amount of the gross trade exposure. As per Chittagong Stock Exchange (Members Margin) Regulations, 2000 the rate of depositing the members margin with the clearing house on the additional trade exposure are as follows:-

Exposure limit violation

The trading right of the members who exceeds the free limit without depositing margin to CSE within the prescribed time shall remain suspended.

Adjustment or refund of members margin:The Exchange can realizes the value of the margin instruments and adjusts the amount so realized if member fails to settle his trade with the clearing house on the settlement day. The member shall be liable to pay the shortfall, if any, including the costs, interest, charges and expenses involved in the realization process, within three days of the written notice of demand issued to him by the Exchange. MEMBERS MARGIN RATE Above taka one crore but not exceeding @ 20% taka two crore Above taka two crore but not exceeding @30% taka three crore Above taka three crore but not exceeding @50% five crore Above taka five crore @100%

ADDITIONAL TRADE EXPOSURE (a ) (b ) (c ) (d )

Transaction by Clint on margin

A member may provide broker service to its client on cash account and /or margin account basis. Client who pays in full for the cost of the securities purchased uses cash accounts. Margin is buying securities on credit while using those same or other securities as collateral for the loan. A client is authorized to borrow part of an investments total purchase cost from their brokerage firm using margin accounts. Brokers have policies and procedures

to protect themselves from market risk, as well as credit risk. As per Margin Rules, 1999 the member in no way extends credit facilities to its client until and unless the client maintains margin account with the broker through a written agreement. The client needs to carefully review the margin agreement provided by broker. The client shall deposit margin not later than seven days from the first date of securities transaction in the form of cash, securities issued by the Government or its agencies, margin able securities etc. The amount of the initial margin would result in the equity being not less than 150% of the debit balance in the account. Additional margin is required to be deposited if the account falls below 150% of the debit balance. The failure to do so may cause the broker to force the sale of or liquidate the securities in the clients account in order to bring the accounts equity back up to the required level.

Risks Involved With Trading on Margin:

A client yo may generally use margin to expand your purchasing power. However it also run the risk there are a number of risks that all investors need to consider in deciding to trade securities on margin. 1. Client can lose more funds than you deposit in the margin account: A decline in the value of securities that are purchased on margin may require you to provide additional funds to the broker that has made the loan to avoid the forced sale of those securities or other securities in your account. 2. The broker can sale of securities in client account: The broker can sell the securities in your account to cover the margin deficiency. Client will also be responsible for any short fall in the account after such a sale. 3. The broker can sell client securities without contacting you: Some investors mistakenly believe that a broker must contact them for a margin call to be valid. As a matter of good customer relations, most brokers will attempt to notify their client but they are not required to do so. 4. Clieent is not entitled to an extension of time to deposit the margin: An extension of time to meet initial or additional margin requirements may not be available to you.

Chapter -5
MARKET SURVEILLANCE & COMPLIANCE MONITORING &PUBLICATION

Market Survellance &Compliance Monitoring:

CSE maintain an effective market surveillance to detect and prevent unethical, unusual and illegal practices in the market. The Exchange Compliance and Surveillance Department is primarily responsible for day to day market surveillance, supervision and compliance monitoring of trading activities, including review of pricing of orders. When any unusual market action occurs it is reported to the Manager, Compliance and Surveillance. In many cases by checking with Surveillance, the Manager will try to trace the reason for the action to a specific cause such as recently disclosed information, or rumours. Market surveillance may also check broker firms as to the source and reason for activity stemming from their particular firms. If no explanation of the unusual activity is revealed the Exchange may make a query to the Company to determine whether they know the cause of the action. It the action appears to be attributable to a rumour or report or to material information that has not been publicly disseminated, the Company is requested to take appropriate corrective action and may be advised to halt trading until such action has been taken. ENFORCEMENT CSE put in place a thorough risk management system which is regularly monitored to pre-empt market failures. CSE Surveillance and Compliance Department monitors the issuers' compliance activities and broker's regular and/or trading activities on regular basis. It watch performance of members, their net worth, undertakes on-line monitoring of members turnover position and exposure, margins arrangements with exchange and clients etc. The Department conducts investigation of any act of member firms or listed companies, as the case which may be deemed to violate the rules and regulations of CSE and/or SEC and gather all evidence concerning the said acts to pass it to the relevant committee. While taking action for violation of any rules and regulation CSE send a show cause notice to the company with an order to comply the relevant clause. And if not complies within stipulated time then take appropriate action which may be to impose fine, to warn, to suspend or to de-list/terminate the listed/member company.

Publication
Portfolio:

Research and publications are essential pre-requisites for effective functioning and development of any stock exchange. To fulfill the need, CSE has been publishing a monthly bulletin named market update since from its very beginning. From November 1997 this monthly bulletin was replaced by its upgraded version under a new title Portfolio. Portfolio is publishing regularly with increasingly better content, sharp analysis and greater quality. In the year 2000 CSE decided to publish Portfolio quarterly instead of monthly. Another monthly publication is newsletter in Bengali.

CSE Bazaar Porikroma:

This monthly issue published 7th day of every month in bangla contains monthly performa data, financial information of the listed securities and other useful news and events occured in previous month

CSE 30
Published in English at a regular interval containing the last 5 years financial, non-financial and graphical data of the securities included in the Selective Index (CSE-30 Index) of Chittagong Stock Exchange.

Share Bazar Shuchok

By observing the immense curiosity of the investors towards share indices used in stock market, we felt the urge to publish a guide that will give a more elaborated idea on share indices. This guide, published in bangla, covers the different indices and their calculation methods, a brief history of indices in Bangladesh stock market and detailed discussion of CSE share indices. We hope that this guide will assist to develop better and clearer concept over stock market, and thus ebabling faster decision making for the investors. First publication date: September, 2005

Library:

CSE has developed and maintaining a specialized and well-furnished library for the use of the members, brokers, dealers, executives as well as students to fertilize the education know-how. These library contains international newspapers, journals, stock market related books, publications, listed companies information, CD-rom, video cassettes, annual report of different stock exchange and of course, different course related books of different categories. The library has been steadily expanding with accession of more books and periodicals, although its user has not been increasing.

The CSE market transaction data are regularly updated in every 2 hours on this web site, which includes the current issues of the Portfolio. CSE also update its web site time to time, especially when any change took place.

Web site:
CSE has an excellent and attractive web-site containing CSE history, rules and regulation, information regarding trade, listed companies, financial information and so on, for the net browsers.

Chapter-6
MISCELLANEOUS ISSUES

DP Service

CSE has opened Central Depository Bangladesh Ltd. (CDBL). now it is one of the Depository Participant (DP) of CDBL to give more Value Added Service for most esteems investors who holds security in electronic form i.e. YOU. Customer Services has always been the prime focus and CSE attends to the needs of the clients well on time

How client do benefited

Automatic credit: All client purchases will be credited to client Account with just instruction. Added to this all the corporate action like bonus shares, shares under scheme of spilt, amalgamation, etc., will be credited to client account automatically. Off market settlement: CSE carry out settlement of trades not done on the stock exchanges (off-market trades). Arrange Dematerialization & Rematerlization: CSE arrange to convert the paper form of share certificates into electronic form through the process of dematerialization and convert the shares held in electronic form into paper form i.e. Share Certificate(s) through the process of rematerialization. Transaction Statement: This monthly summary statement will show opening balance, securities pending for Demat, transfers made by client, credits received by client, quantity pledged or lent by you and the closing balance for each security with appropriate description. Amendments to client profile: In case there is any change to the client personal profile like change of bank A/c or change of address etc we will intimate all the company in client portfolio regarding the change

Account Opening:
Similar to the brokers, who trade on your behalf in and outside the stock exchanges, a depository participant is your representative (agent) in the depository system CDBL. The process of opening an account with us is similar to the opening of a bank account. You require to sign an agreement with us which will set out the rights and duties of the both you and the Exchange. Just like a bank branch, we will maintain your securities account balances and intimate to you the status of your holdings from time to time. We will dispatch the statement of holdings to you periodically; however the statement of holdings can be sent to you as and when requested for a fee.

Fees
As mentioned this is a value addition to our client. Hence we have kept the cost very nominal. At the same time maintaining our high standard of quality services that is synonymous with our name. Chittagong Stock Exchange The introductory offer prices are as follows Account Opening Charges 250/= Inclusive of Tk.100 as adjustable amount Custodial Charges .06% (60 paisa in per thousand taka), minimum Tk.3.50 Demat Charges .0004 ( 40 paisa in per thousand taka), minimum Tk.7.00 and transportation charge Tk.30/= Remat Charges .15 ( 15 paisa in per share), minimum Tk. 110/= Transaction Charges(Buy .0004 (40 paisa in per thousand Taka), & sell) minimum Tk. 7.00 Annual Maintenance Nil Statement of Accounts Free of cost Billing Cycle End of month Closure Fee AC Closing fee Tk. 50/= 1. Fees schedule are based on existing CDBL charges and may be changed at our discretion. 2. Additional statement will be charged Tk. 10/- per statement. 3. Service tax and other levies would be extra as applicable.

CSE Investor Protection Fund:

What protects you if your broker company becomes insolvent or it goes for winding up? That's why the CSE Investor Protection Fund exists. The CSE, in collaboration with its member companies established CSE Investor Protection Fund in 1999 to compensate within define limits, the claims of the Client against defaulting broker. You, the investor, pay no fees for getting protection of the fund. Coverage is automatic when you open an account with a CSE Member. However you must lodge the claims to the Trustees within 6 months from the date of declaring defaulter of the member. What backs up this Protection? The fund is managed and controlled by a Board of Trustees. CSE contributed Tk. 0.5 million as initial contributions to the fund. CSE also contribute on quarterly basis to the Fund as its contribution the amount

representing 0.50% (point five zero percent) of the listing fee received by the CSE during the immediately preceding quarter placed in the Fund immediately after closure of each quarter. CSE Members makes periodicals contribution to the fund at the rate of Tk. 0.50 for every Tk. 10.00 lakh of their respective transactions. Participants in the fund for members are compulsory. There is a limit on the amount of coverage. The compensation paid to an individual investor shall not exceed a sum of Tk. 50,000/- (Taka Fifty Thousand Only) but the Board of Trustees may, at any time, in consultation with the Board of Directors may increase the limit.

Over The Counter:

A new phase for the listing facility in the Capital Market. OTC is designed for two segments of companies The companies who are delisted from trading Growth companies who are preparing for coming to the stock exchange.

CSE established Over the Counter facilities with a specific facilitate small & medium innovative and high growth enterprises, in raising resources efficiently through the capital market.

Eligibility:
The eligibility criteria for the membership are presented below: A corporate body with a minimum paid up capital of BDT 2.5 million Any partner or director thereof as the case may be is/has not Less than twenty-one years of age; Bankrupt; Person of unsound mind; Person convicted by a competent court of an offence involving moral turpitude. Found at any time by SEC or any stock exchange or court involved in any misconduct in respect stock exchange transaction/market

Membership of CSE facilitates a person prospects to become trading members (stock brokers) of the Exchange through compliance of the regulatory provisions of CSE and SEC. There are 129

Procedure of payment for CSE Membership

The CSE membership is transferable subject to the approval of the Board. However a fees of Tk. 2, 50,000.00/- is to be paid to the Exchange. Admission to membership of the Exchange is urently open & available Tk. 10, 00,000.00 (Ten Lacs) should be paid along with the application as earnest money. Balance amount of Tk. 40, 00,000.00 (Forty Lacs) should be paid within 15 days (Fifteen days) from the date of allotment of the membership. Failure to pay the full amount within the specified time will result in cancellation of allotment of the share and no notice will be required for this cancellation and the amount of Tk.10 (Ten lacs) paid with the application will be REFUNDED in full without interest within 4 (Four) weeks from the end of 30 (Thirty) days of allotment. All payment should be made by Demand Draft/Pay Order payable only to Chittagong Stock Exchange Limited. In case the application is not accepted, the deposit of Tk. 10, 00,000.00 (Ten Lacs) will be REFUNDED without any interest by the Exchange within four weeks from the day of such decision of refusal.

BROKER/DEALAR
The trading platform of a stock exchange is accessible only to broker, dealer and their authorized representative. At present Dealers can perform transaction on their own account only while brokers act as agent of their client. Broker and Dealers shall be eligible to trade in CSE when it: Becomes a members of the CSE; Becomes members of the CSE Clearing House; Open a Clearing Account with a Depository Participant of CDBL; Obtains a Brokerage/ Dealership license from the Securities and Exchange Commission; Is not otherwise barred by CSE or SEC

Disciplinary action against member

CSE may exercise any of its following disciplinary powers against a member if the member or its director, authorized representative or employee commits any act or omission as mentioned in the Regulation 79 of the General Rules and Regulations of CSE.

Penalization Warning Temporary prohibition from performance

Prohibition from any performance of work in a member company within the period of time prescribed by the Board

Expulsion
The expelled member shall forfeit to the Exchange its right of membership and all rights and privileges as a member of the Exchange

Listing
This department is responsible for: Arrange training Ad hoc legal problems Liaison with Securities and Exchange Commission Maintain master organ gram Maintain personnel files and staff list Monitor and record leave requests and leave taken Monitor rules and regulations Monitor, receive and disseminate regular company information Respond to requests for information, members queries and complaints

How to list
CSE while list a company considers ensuring that the companies meet the listing criteria of the Exchange and also considers the sufficiency of public interest in the company. The main eligibility criteria for initial listing contained in CSE Listing Regulations is as follows:

The Company shall be a Public Limited Company under the Companies Act,1994 Minimum Paid up capital of the applicant company shall be BDT Ten Million (USD 0.20 million) Share subscription must be by at least 250 applicants

In case your company fulfils the criteria, please fill in the listing application form and send the documents as mentioned in the regulation III (6) of the LISTING REGULATION for further processing.

INITIAL LISTING FEE

Up to Tk. 10 crore of Paid-up capital @ 0.25% Above Tk. 10 crore of paid-up capital @ 0.15

However, the total listing fee shall be minimum of Tk. 10,000 (ten thousand) and maximum of Tk. 20 lac.

Slab/Paid-up Capital (Tk. In Million) Up to Up to Up to Up to Up to Up to Up to Up to 10 20 30 40 50 75 100 125

Rates of Annual Listing Fees in Taka. 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000

Above Above Above Above Above Above Above

10 20 30 40 50 75 10 0

& & & & & & &

Above Above Above Above Above Above Above Above Above Above Above The Board case.

Up to & Up to & Up to & Up to & Up to & Up to & Up to & Up to & Up to & Up to Abov e of CSE has the right

12 5 15 0 20 0 25 0 30 0 40 0 50 0 60 0 70 0 80 0

&

150 200 250 300 400 500 600 700 800 1000 1000

50,000 55,000 60,000 65,000 70,000 75,000 80,000 85,000 90,000 95,000 100,000

to ease any condition in case of a deserving

Inspection

During the period, eleven brokerage houses were inspected by SEC based on some specific observations of surveillance people responsible for monitoring daily securities trading. In this period the Commission requested CSE to investigate into the books and records of three brokerage houses of CSE in respect of transactions of Bank Asia shares and asked DSE to inspect books and records of three brokerage houses of DSE regarding trading of Bata Shoe Company shares, Beach Hatchery Ltd shares and Rahman Chemical shares. In the referred period the Commission decided that the SECs Surveillance Team should conduct regular inspection of books and records of at least one stock broker/dealer of the stock exchanges in each month. Accordingly, the SEC Surveillance team carried out inspection in compliance with the aforesaid decision. In a brief it performs the following functions: Spot verification Check whether members are following the company act or not check whether members are maintaining the books properly maintain checklist

Chapter-7

SWOT ANALYSIS OFCHITTAGONGSTOCK EXCHANGE

Key Strength

Exceptional quality and professionalism in its service offering to clients An experienced and dedicated senior management team A trained and professional sales team A competent equity market research unit The widest network of local branches (Dhaka, Chittagong & Sylhet) State of the art technology utilized in trade execution and back office and reporting systems International affiliation

Opportunities: Investors are now more conscious about investing their money into the shares of the companies. New awareness arising to the peoples mind, new publicity is made for the attraction of this field. The system is much mobilized and try capture more and more investors, After 1996s incidence, now Securities & Exchange Commission (SEC). The SEC is now well structured and well-based, wellestablished. The number of Internet users is increasing. Internet is a key part of trading. Day by day the using of internet is accelerating, that allow the investors to an easy access of trading in terms of shares. Now they can order the representative broker to sell the shares or buy. So, internet trading system (ITS) is a wonderful innovation for CSE. The governments policy is changing. The changing environment in share market provides the precise help to the investors. Commercial Bank reluctance to provide long term long. SAFE (South Asia Federation of Exchange). OTC market is a potential outcome for CSE. Now in these very days, its prosecuting the south Asian countries. The neighboring countries will be also benefited by this. Huge round of transaction may take place in this way. Lots of quality fresh business graduate are coming up from both private and public education sector in Bangladesh. These fresh graduates may create an opportunities to stimulate professionalism in stock market.

Weaknesses: Stock markets operate on a particular time in the daytime. This time span is not sufficient for the non-institutional investors. The time that it operates is very limited that the daily transaction in doing so can not be fulfilled which puts the investor in tremendous crisis.

High bank interest rate possesses high threat for stock market. High interest rate always discourages the investors. Lack of institutional investors. Still there is lacking for the institutional investor. The CSE operations, the CSE criteria, rules and regulations are responsible for this. If the favorable environmental attitude is available more and more institutional investor will come. Regulatory body like SEC needs modernization. The controller of CSE, security exchange commission (SEC) need more technological advancement. To maintain a constant monitoring it must fertilize its resource like technological, personnel, departmental etc. Lots of listed company does not perform their duty regularly like they do not perform AGM, GM regularly, do not provide dividend regularly, do not inform to be investors etc. The different organization is categorized into A, B, N, and Z category. Those who perform AGM regularly and declared dividend more than 10% they are A category and who perform AGM regularly and declared dividend less than 10% they are B category, who are new they N category and those who do not perform AGM regularly and declared no dividend are Z category.

Threats: Regulatory bodys (SEC) regulation. The regulation of SEC still not up to mark that may discourage in investing. BTTBs monopolistic attitude. The logistic approach is still prevailing. The attitude should obtain an administrative driven. Bargaining power of listed companies. The continuous bargaining is still prevailing which may impact in CSE. The lion share of DSE. Frequent political instability. The Micro environmental factor like political instability always takes place in the country which seriously injured the investor. And it case tremendous change in price flections of shares. Lower growth rate & lower savings rate & per capita GDP. The pace of industrialization is slow. The contribution of industrialization sector in GDP is bellow expectation. Most of the company do not provide satisfactory rate of dividend.

Chapter -8
LIMITATION&METHODOLOGY

Limitations:
There is insufficient time to do this study. Sufficient books, publications and journals are not available. The main limitation is to conduct interview on some top level decision makers as they are less interested to share their strategies and also they have very busy schedules. R&D policies in every organization are very confidential so that people of R&D and other employees do not want to disclose maximum information.

Methodology
Methodology is a vital part of a research proposal. This is a descriptive & calculative types of research. This report is prepared on the basis of primary and secondary data. The relevant data information was collected through direct interview of the personnel engaged in various departments of the CSE. The secondary data source is annual report of the CSE as well as other publications of the company and from their web site. The subject matter related to methodology of this report is the following:

Primary Sources of Data:

Direct interview & Conversation. Official records. Observation of various organizational procedures. Experts opinion. Structured and unstructured questions have been asked to collect information.

Secondary Sources of Data:

Annual reports of the Cement companies The relevant papers and different books publications. Manual of different departments. Various document of the CSE Web site WWW.cse.bd.com

Chapter- NINE

CAPITAL ASSET PRICING MODEL (CAPM) Theoretical Analysis

Capital Asset Pricing Model (CAPM)

In finance, the capital asset pricing model (CAPM) is used to determine a theoretically appropriate required rate of return of an asset, if that asset is to be added to an already well-diversified portfolio, given that asset's nondiversifiable risk. The model takes into account the asset's sensitivity to nondiversifiable risk (also known as systematic risk or market risk), often represented by the quantity beta () in the financial industry, as well as the expected return of the market and the expected return of a theoretical risk-free asset. The model was introduced by Jack Treynor (1961, 1962),[1] William Sharpe (1964), John Lintner (1965a,b) and Jan Mossin (1966) independently, building on the earlier work of Harry Markowitz on diversification and modern portfolio theory. Sharpe, Markowitz and Merton Miller jointly received the Nobel Memorial Prize in Economics for this contribution to the field of financial economics.

Objective of Capital Asset Pricing Model (CAPM)

When it comes to putting a risk label on securities, investors often turn to the capital asset pricing model (CAPM) to make that risk judgment. The goal of CAPM is to determine a required rate of return to justify adding an asset to an already well-diversified portfolio, considering that asset's non-diversifiable risk. The CAPM takes into account the non-diversifiable market risks or beta () in addition the expected return of a risk-free asset. While CAPM is accepted academically, there is empirical evidence suggesting that the model is not as profound as it may have first appeared to be. Read on to learn why there seems to be a few problems with the CAPM.

Assumptions of Capital Market Theory, Markowitz-Style

the following assumptions apply to the base theory:

o o o o

All investors are risk averse by nature Investors have the same time period to evaluate information There is unlimited capital to borrow at the risk-free rate of return Investments can be divided into unlimited pieces and sizes

There are no taxes, inflation or transactions cost

Advantages of Capital Asset Pricing Model (CAPM)

CAPM provides investors a way to predict the return of an asset for its level of systematic, or market, risk. CAPM rests on a number of assumptions, which allow it to focus on the relationship between return and systematic risk.

Problems of Capital Asset Pricing Model (CAPM)

The model assumes that the variance of returns is an adequate measurement of risk. This would be implied by the assumption that returns are normally distributed, or indeed are distributed in any twoparameter way, but for general return distributions other risk measures (like coherent risk measures) will reflect the active and potential shareholders' preferences more adequately. Indeed risk in financial investments is not variance in itself; rather it is the probability of losing: it is asymmetric in nature. The model assumes that all active and potential shareholders have access to the same information and agree about the risk and expected return of all assets (homogeneous expectations assumption).

The model assumes that the probability beliefs of active and potential shareholders match the true distribution of returns. A different possibility is that active and potential shareholders' expectations are biased, causing market prices to be informationally inefficient. This possibility is studied in the field of behavioral finance, which uses psychological assumptions to provide alternatives to the CAPM such as the overconfidence-based asset pricing model of Kent Daniel, David Hirshleifer, and Avanidhar Subrahmanyam (2001).

The model does not appear to adequately explain the variation in stock returns. Empirical studies show that low beta stocks may offer higher returns than the model would predict. Some data to this effect was presented as early as a 1969 conference in Buffalo, New York in a paper by Fischer Black, Michael Jensen, and Myron Scholes. Either that

fact is itself rational (which saves theefficient-market hypothesis but makes CAPM wrong), or it is irrational (which saves CAPM, but makes the EMH wrong indeed, this possibility makes volatility arbitrage a strategy for reliably beating the market). The model assumes that given a certain expected return, active and potential shareholders will prefer lower risk (lower variance) to higher risk and conversely given a certain level of risk will prefer higher returns to lower ones. It does not allow for active and potential shareholders who will accept lower returns for higher risk. Casino gamblers pay to take on more risk, and it is possible that some stock traders will pay for risk as well.

The model assumes that there are no taxes or transaction costs, although this assumption may be relaxed with more complicated versions of the model. The market portfolio consists of all assets in all markets, where each asset is weighted by its market capitalization. This assumes no preference between markets and assets for individual active and potential shareholders, and that active and potential shareholders choose assets solely as a function of their risk-return profile. It also assumes that all assets are infinitely divisible as to the amount which may be held or transacted. The market portfolio should in theory include all types of assets that are held by anyone as an investment (including works of art, real estate, human capital...) In practice, such a market portfolio is unobservable and people usually substitute a stock index as a proxy for the true market portfolio. Unfortunately, it has been shown that this substitution is not innocuous and can lead to false inferences as to the validity of the CAPM, and it has been said that due to the inobservability of the true market portfolio, the CAPM might not be empirically testable. This was presented in greater depth in a paper by Richard Roll in 1977, and is generally referred to as Roll's critique.

The model assumes economic agents optimize over a short-term horizon, and in fact investors with longer-term outlooks would optimally choose long-term inflation-linked bonds instead of shortterm rates as this would be more risk-free asset to such an agent. The model assumes just two dates, so that there is no opportunity to consume and rebalance portfolios repeatedly over time. The basic insights of the model are extended and generalized in the intertemporal CAPM (ICAPM) of Robert Merton, and the consumption (CCAPM) of Douglas Breeden and Mark Rubinstein. CAPM assumes that all active and potential shareholders will consider all of their assets and optimize one portfolio. This is in sharp contradiction with portfolios that are held by individual shareholders: humans tend to have fragmented portfolios or, rather, multiple portfolios: for each goal one portfolio see behavioral portfolio theory1 and Maslowian Portfolio Theory. Empirical tests show market anomalies like the size and value effect that cannot be explained by the CAPM.

CHAPTER TEN Empirical and Quantitative Research Based on Five Cements Company

A= ARAMIT CEMENT B= MEGHNA CEMENT MILLS LIMITED (MEGHNACEM) C= CONFIDENCE CEMENT LIMITED (CONFIDCEM) D= HEIDELBERG CEMENT BANGLADESH LTD (HEIDELBCEM) E= LAFARGE SURMA CEMENT LIMITED (LAFSURCEML) Covariance 0.00035006 covariance of A,B 9 0.00018934 covariance of A,C 1 7.114673Ecovariance of A,D 06 0.00021179 covariance of A,E 7 0.00014157 covariance of B,C 7 covariance of B,D 9.1303E-06

0.00039845 covariance of B,E 7 0.00034384 covariance of C,D 9 -6.48177Ecovariance of C,E 06 0.00054713 covariance of D,E 6 All SD A aramit 0.057211072

B meghna 0.04490242 1 Correlation 0.13627126 2 0.07892236 5 0.00231588 5 0.10129757 9 0.07518969 9 0.00378666 9 0.24281257 5 0.15270219 5 0.00422949 6 0.27880289 6

C confiden 0.041934

D heidelb u 0.0536 98

E surma 0.036546

Correlation of A,B Correlation of A,C Correlation of A,D Correlation of A,E Correlation of B,C Correlation of B,D Correlation of B,E Correlation of C,D Correlation of C,E Correlation of D,E

Market SD

r-

-0.00078885 varience stdev 0.016031282

(R-R ) (R-R/n ) (R-R/n )

0.395269072 0.000256835 0.016026073

All Covariance with market Covariance M,A Covariance M,B Covariance M,C Covariance M,D Covariance M,E Market Variance Beta Beta Beta Beta Beta of of of of of M,A M,B M,C M,D M,E of 1.976E-05 of -1.2979E-06 of -2.2769E-05 of -5.5449E-06 of -2.1529E-05 (R-R/n ) 0.07693738 -0.0505336 -0.08865036 -0.02158916 -0.08382277 0.000257

Assume that we expect the economy sRFR to be 11.65% percent and the return on the market portfolio ( RM) to be 12.50%.This implie a market risk premium of .45%.With these inputs , the SML equation would yield the following required rates of return for these five stock.

a.Aramit Cement(A)

Aramit Cement Limited was incorporated on 19thAugust 1995 as a public limited company by shares and established with technical collaboration of a Chinese company for producing Ordinary Portland Cement from the very beginning of its commercial production that started on 10 thNovember 1999. The company has been maintaining the quality of the product for which it has own the confidence of the customers and also attained the high status

international ISO 9002 Certificate. Company's products carrying brand name Camel has already become highly popular among the consumers.

Company Information - ARAMIT CEMENT LIMITED (ARAMITCEM)

Current Market Information Last Trade Price (LTP) Last Trade Date Change Open Price Day's Range 80.00 Jun 27, 2012 2.70 (0.03%) 77.30 80.00 80.00 Total Trade Total Volume Close Price 1.00 1,000.00 80.00

Yesterday Close Price 77.30 Market Capital in BDT 1,190.42 (mn)

Contact Information and Basic Information Address : 53/A. Kalurghat Heavy I / E, P.O Mohra, Chittagong Share Phone Office: Redcrescent tower,17 Mohakhali Fax Website 88-031-671583 , 8851974 http://www.aramitgroup.com Email Listing Year (88031) 670473, 671950 (Ctg);(8802) 9887176,9881095 altd@ctpath.net Sep 9 1998

Market Lot 500 Face Value 10

Paid-up Capital in154.00 BDT* (mn) Business CEMENT Segment Asset Manager of the Fund Net Asset 0.00 First Trade Sep 9 1998 Date Remarks

Market A Category Authorized Capital in500.00 BDT* (mn) Total no. of 15,400,000 Securities 52 Week's 0.00 - 1,110.00 Range Contact Address of the Asset Manager Year End Reserve Surplus 201112 / 27.57

Share Sponsor/Direc Govt. Percentage: tor 42.86 0.00 Half Year End(HY) Information HY Net 530.12 Million Turnover HY Net Profit 3.2 Million after tax HY EPS 2.29

Institute 29.51

Foreign 0.00

Public 27.63

Last AGM Information AGM Date Jun 16 2012 Record Date May 10 2012 Dividend (%) 10.00 (Stock) Bonus Issue 10% 2011, 10% 2010 Price Sensitive http://aramitgroup.com/price-sensitive-information.php?pid=3 Information

Financial Performance Basic EPS Based on Performan Continuin Including ce Year g Extraoperation Ordinary s Income 2006 2007 2008 2009 2010 2011 2012 4.98 10.01 1.72 43.35 5.668 NA NA NA NA NA 0 0 NA NA Basic EPS (restated) Based on Continuin Including g Extraoperation Ordinary s Income 0 0 0 0 5.153 NA NA NA NA NA 0 0 NA NA Net Asset Value Per Share Restated Net Profit After% % Net AssetTax (mn) Dividen Divide Value Per Includi d nd Share Continui ng Yield ng Extraoperatio Ordinar ns y Income 0 6.97 NA 0 0 14.02 2.41 60.69 79.36 NA NA NA NA 0 0 NA NA 7.5 0 12 n/a NA NA 4.98 0 2.12 0 NA NA 0

8.95 16.4

14.67 0 47.75 0 9.443 8.584 NA NA NA NA

Last One Month Close Price and Traded Volume Graph

Closing Price Total Trade Highest value : 93 Lowest value : 77.2 Date From : 27 May, 2012 Date To : 27 Jun, 2012 Trading Days : 23

E(Ra) = REF + (Rm REF) = .1165 + .076937 (.125 - .1165) = .1165 + .076937 * .0085 = .1165 + .000653 =.1172 =11.72%

b.Meghna Cement(B)
Bashundhara group in the manufacturing sector. This enterprise produces world-class cement and, as a testimony to this, stands the fact that the concern has been awarded the iso-9001 certification for sustained quality control effort. The company markets its cement under the registered trademark of king brand. Meghna Group of Industries has entered into the cement manufacturing industry with a glorious perspective of developing Bangladesh. It is a close circuit modern cement plant. High quality cement is processed by using the most modern machineries with automatic computerized controlling system. Raw materials such as very high quality gypsum and clinker are imported from various sources of the world to ensure best quality cement for MGI's

consumers. Because of its uncompromising quality, MGI has become one of the largest quality cement producers and suppliers in Bangladesh.

Company Information (MEGHNACEM)

Current Market Information Last Trade Price (LTP) Last Trade Date Change Open Price Day's Range 129.00 Jun 27, 2012 5.30 (0.04%) 123.70

MEGHNA

CEMENT

MILLS

LIMITED

Total Trade Total Volume Close Price

2.00 600.00 0.00

Yesterday Close Price 123.70 Market Capital in BDT 2,783.30 (mn)

125.00 - 129.00

Contact Information and Basic Information

Address : 125/A, Bashundhara,Baridhara,Dhaka-1212 Fax Website Market Lot Face Value Fax : 88 - 02-8401797

Block-A,

Phone Email Listing Year Market Category

88-02--8402008-17, 8401806 bgc@bdcom.com Oct 26 1996 A

http://www.bg.com.bd/M-Cement/ 100 10

Authorized Capital in BDT*5,000.00 (mn) Total no. Securities 52 Range of 22,500,400 0.00 - 167.00

Paid-up Capital 225.00 in BDT* (mn) Business Segment Asset Manager of the Fund Net Asset 0.00 CEMENT

Week's

Contact Address of the Asset Manager Year End Reserve Surplus 201112 / 450.61

First Trade Date Oct 26 1996 Remarks Share Percentage:

The No. of shares has been increased due to Stock Split(100 To 10). EPS & NAV have also been changed accordingly. Sponsor/Direct Govt. or 52.00 0.00 Institute 20.00 Foreign 0.00 Public

28.00

Half Year End(HY) Information HY Net Turnover 3262.7 HY Net Profit after 101.39 tax HY EPS 4.51 Last AGM Information AGM Date Jun 21 2012 Record Date Jun 4 2012 Dividend (%) 25.00 Bonus Issue n/a Price Sensitive Information

Financial Performance

Basic EPSNet Asset (restated) Value Based on Based on Includi Includi Per Performan Share Continui ng Continui ng ce Year ng Extra- ng Extraoperatio Ordinar operatio Ordinar ns y ns y Income Income 320.4 2006 46.71 NA 0 NA 2 Basic EPS 2007 2008 2009 2010 2011 2012 65.86 10.28 5.87 NA NA NA NA NA 0 NA NA NA 0 0 0 NA NA NA NA NA 0 NA NA NA

Restat Net Profit After Tax% ed Net(mn) Dividen Asset d Value Per Continui Including Share ng Extraoperatio Ordinary ns Income 0 105.1 NA 25 30 15 35 NA NA NA

% Dividend Yield

9.06 8.52 3.89 0.37 NA NA

275.2 0 255.4 0 9 29.92 0 NA NA NA NA NA NA

148.18 NA 23.13 NA

131.99 0 NA NA NA NA NA NA

NA

Last One Month Close Price and Traded Volume Graph

Closing Price Total Trade Highest value : 154.6 Lowest value : 116 Date From : 27 May, 2012 Date To : 27 Jun, 2012 Trading Days : 23

E(Ra) = REF + (Rm REF) = .1165 - .0505 (.125 - .1165) = .1165 - .0505 * .0085 = .1165 - .000429

=.1169 =11.69%

C.Confidence Cement (C)

Confidence Cement Limited (CCL) is the first private sector cement manufacturing company in Bangladesh established in early 90s with having 4,80,000 M/T annual production capacity at chittagong, 16 K.M away from chittagong port, besides Dhaka chittagong highway. CCL is the first ISO-9002 certified commencement Condifence Cement Limited is the first provate sector cement manufacturing company in Bangladesh established in early 90s. Confidence Cement Ltd is also the first ISO-9002 certified Cement manufacturer in Bangladesh. It has a unique manahement system in quality assurance, marketing and sales procuremssents. Company Information - CONFIDENCE CEMENT LIMITED (CONFIDCEM) Current Market Information Last Traded Price Last Trade Date Change Open Price Day's Range 0.00 - 0.00 Not Today Traded Not Today Traded Total Trade Total Volume Close Price Yesterday Close Price Market Capital in BDT 0.00 (mn)

Contact Information and Basic Information

Address : Ispahani Building (5th Floor), 14 Phone 15 Motijheel C/A, Dhaka - 1000 Fax Website 88 - 02 - 9565317 Email

88-02-9562431, 9565659 confi@bdcom.com

http://www.confidencegroup.co Listing YearOct 21 1995 m.bd Market Market Lot 20 A Category Face Value Authorized 10 Capital in500.00 BDT* (mn) Paid-up Total no. of Capital in326.00 37,494,600 Securities BDT* (mn) Business 52 Week's CEMENT 0.00 - 166.50 Segment Range Asset Contact Manager of Address of the Fund the Asset Manager Net Asset 0.00 Year End 201112 First Trade Oct 21 1995 Date Reserve / 1481.9 Surplus Remarks 1. 752,400 Right Shares of Tk 100 each at an issue price of Tk 700 each including a premium of Tk 600 offered & subscribed on the basis of 10R:3 from 08.09.2010 To 23.09.2010. 2. Revaluation Surplus has been added to Reserve. Share Sponsor/Direc Govt. Institute Foreign Public Percentage: tor 24.44 0.00 28.10 0.00 47.46 Half Year End(HY) Information HY Net 1165.99 Turnover HY Net Profit 139.10 after tax HY EPS 3.71 Last AGM Information AGM Date Jun 26 2012 Record Date May 14 2012 Dividend (%) 40.00 (20% Cash & 20% Stock) Bonus Issue 20% 2011, 15% 2010, 20% 2009, 10% 2008

Price Sensitive Information

Financial Performance Basic EPS Based on Performan Continuin Including ce Year g Extraoperation Ordinary s Income 2006 2007 2008 2009 2010 2011 2012 21.65 27.73 -14.98 6.86 NA NA NA NA NA NA 0 NA NA NA Basic EPS (restated) Based on ContinuinIncluding g ExtraoperationOrdinary s Income 0 0 -13.62 5.72 NA NA NA NA NA NA 0 NA NA NA Net Asset Value Per Share Restate Net Profit After% % d NetTax (mn) Dividen Divide Asset Includi d nd Value Continui ng Yield Per ng ExtraShare operatio Ordinar ns y Income 41.13 52.68 NA NA 15 15 10 10 NA NA NA 10.83 4.06 0 0.72 NA NA

332.9 0 3 345.6 0 6 330.6 300.62 7 89.48 74.57 NA NA NA NA NA NA

-28.46 NA 143.4 NA NA NA 0 NA NA NA

NA

Last One Month Close Price and Traded Volume Graph

Closing Price Total Trade

Highest value : 125.8 Lowest value : 104 Date From : 27 May, 2012 Date To : 27 Jun, 2012 Trading Days : 23

E(Ra) = REF + (Rm REF) = .1165 - .08865 (.125 - .1165) = .1165 - .08865 * .0085 = .1165 - .000753 =.1157 =11.57%

d.Heidelberg Cement Bangladesh Ltd(D) HeidelbergCement Bangladesh Ltd, one of the group companies of HeidelbergCement Group, founded in Germany in 1873, with its core products being cement, ready-mixed concrete, aggregates and related activities, is one of the leading producers of building materials worldwide. The group employs around 43,000 people in more than 50 countries Overview
In 1999, HeidelbergCement acquired its operations in Bangladesh. Our subsidiary HeidelbergCement Bangladesh Ltd., which is the market leader in Bangladesh, operates two cement grinding plants in Dhaka, the capital city, and in Chittagong. In order to benefit from steady growth in the Bangladeshi cement market, we have built an additional cement mill with a capacity of 0.8 million tonnes in our Chittagong grinding plant. After successful test runs at the end of 2011, production commenced at the start of 2012. Company Information - HEIDELBERG CEMENT BANGLADESH LTD (HEIDELBCEM) Current Market Information Last Trade Price (LTP) Last Trade Date Change Open Price Day's Range 0.00 0.00 Not Today Traded Not Today Traded Total Trade Total Volume Close Price Yesterday Close Price Market Capital in BDT (mn) 0.00

Contact Information and Basic Information Address : SYMPHONY\" (7th Floor), Plot 88-02-8811691 No. SE (F) 9, Road No. 142, South Phone Avenue, Gulshan-1, Dhaka-1212. info@heidelbergcementb Email d.com Fax 88 - 02 - 8812584 http://www.heidelbergcemen Listing Year Oct 21 1995 Website t.com Market A Category Market Lot 100 Authorized Face Value Capital in0.00 10 BDT* (mn) Paid-up Total no. of 56,503,580 Capital in565.00 Securities BDT* (mn) 52 Week's 0.00 - 2,930.00 Business Range CEMENT Segment Contact Asset Address of the Manager of Asset the Fund Manager Net Asset First Date 0.00 Year End Reserve Surplus 201112 / 4092.5 Trade Oct 21 1995

Remarks Share Percentage:

Sponsor/Direc Govt. tor 61.55 0.00

Institute 18.16

Foreign 0.00

Public 20.29

Half Year End(HY) Information HY Net 4649.49 Turnover HY Net Profit 480.33 after tax HY EPS 8.50 Last AGM Information AGM Date May 14 2012 Record Date Apr 23 2012 Dividend (%) 45.00 (Cash) Bonus Issue 5% 2006, 10% 2005, 17% 2004 Price

Sensitive Information Financial Performance

Basic EPS Based on Performan Including Continuin ce Year Extrag Ordinary operations Income 2006 2007 2008 2009 2010 2011 2012 97 110 104.86 150.59 NA NA NA NA NA NA 0 NA NA NA Basic EPS (restated) Based on Including Continuin Extrag Ordinary operations Income 0 0 0 0 NA NA NA NA NA NA 0 NA NA NA Net Restated Net Profit After% % Asset Net AssetTax (mn) Dividen Dividen Value Value Per Includi d d Yield Per Share Continui ng Share ng Extraoperatio Ordinar ns y Income 436.37 0 521.58 NA 16 2.47 505.6 0 585.46 0 703.05 0 NA NA NA NA NA NA 621.54 NA 592.52 NA 850.88 0 NA NA NA NA NA NA 25 33 38 NA NA NA 2.07 2.72 1.77 NA NA

NA

Last One Month Close Price and Traded Volume Graph

Closing Price Total Trade

Highest value : 240.6 Lowest value : 218.7 Date From : 27 May, 2012 Date To : 27 Jun, 2012 Trading Days : 23

E(Ra) = REF + (Rm REF) = .1165 - .02159 (.125 - .1165) = .1165 - .02159 * .0085 = .1165 - .000183 =.1163 =11.63%

E.Lafarge Surma Cement (E)

Lafarge Surma Cement Ltd. (LSC) was incorporated on 11 November 1997 as a private limited company in Bangladesh under the Companies Act 1994 having its registered office in Dhaka. On 20 January 2003 Lafarge Surma Cement Ltd. was made into a public limited company. The Company is listed in Dhaka and Chittagong Stock Exchange.Today,LafargeSurmaCementLtd.hasmorethan20,000shareholders. In November 2000, the two Governments of India and Bangladesh signed a historic agreement through exchange of letters in order to support this unique cross border commercial venture and till date it is the only cross border industrial venture between the two countries. Since Bangladesh does not have any commercial deposit of limestone, the agreement provides for uninterrupted supply of limestone to the cement plant at Chhatak in Bangladesh by a 17 km long belt conveyor from the quarry located in the state of Meghalaya. The company in Bangladesh, Lafarge Surma Cement Ltd. wholly owns a subsidiary company Lafarge Umiam Mining Private Ltd. (LUMPL) being registered inIndia, which operatesits quarryat Nongtraiin Meghalaya. This commercial venture with an investment of USD 280 million, which is one of the largest foreign investments in Bangladesh, has been financed by Lafarge of France, world leader in building materials, Cementos Molins of Spain, leading Bangladeshi business houses together with International Finance Corporation (IFC The World Bank Group), the Asian Development Bank (ADB), German Development Bank (DEG), European Investment Bank (EIB), and the Netherlands Development Finance Company (FMO). Lafarge Group, with 176 years of experience, holds worlds top-ranking position in Cement, Aggregates, Concrete and Gypsum. It operates in 64 countries with around 68,000 employees. Lafarge is named as one of the 100 Most Sustainable Companies in the World. Cementos Molins of Spain, with 75 years of experience, also operates in Mexico, Argentina, Uruguay, and Tunisia.

Now, after three years of production operations, we are producing world class clinker and cement which is a demonstration of the sophisticated and state-of-the-art machineries and processes of our plant at Chhatak. The Company is already meeting about 8% of the total market need for cement and 10% of total clinker requirements of Bangladesh market whereas we continue to enjoy strong growth rates. By supplying clinker to other cement producers in the market, we contribute some USD 50~60 million per annum worth of foreign currency savings for the country. We contribute around BDT 1 (one) billion per annum as government revenue to the national exchequer of Bangladesh. About 5,000 people depend on our business directly or indirectly for their livelihood. We believe that cement is an essential material that addresses vital needs of the construction sector. We are optimistic to meet the growing needs for housing and infrastructure in the construction sector of Bangladesh. Company Information (LAFSURCEML) LAFARGE SURMA CEMENT LIMITED

Contact Information and Basic Information Address : Suvastu Imam Square, 65 Gulshan Avenue, 3rd Phone Floor, Dhaka-1212 Fax Website Market Lot Face Value 88 - 02 - 8825413, 8815167 http://www.lafarge-bd.com 500 10 Email Listing Year Market Category 8812026, 8854847 info@bd.lafarge.com Dec 29 2003 Z

Authorized Capital 14,000.00 in BDT* (mn) Total no. Securities of 1,161,373,500

Paid-up Capital 11,613.74 in BDT* (mn) Business Segment CEMENT

52 Week's Range 0.00 - 346.25 Contact Address of the Asset Manager Year End 201112

Asset Manager of the Fund Net Asset 0.00

First Trade DateCurrent Market Information Last Trade 40.30 Total Trade 17.00 Price (LTP) Last TradeJun 27, Total Volume 13,000.0 0 Date 2012 Close Price 0.00 0.20 Change (0.00%) Yesterday 40.10 Open Price 40.10 Close Price Day's 39.70 - Market 46,571.0 in Range 40.40 Capital 8 BDT (mn)

Reserve / Surplus -5343.73

Remarks Share Percentage:

Sponsor/Direc Govt. tor 58.87 0.00

Institute Foreign 5.77 14.97

Public 20.39

Half Year End(HY) Information HY Net Turnover 2354.61 HY Net Profit after tax -1331.78 HY EPS -2.29 Last AGM Information

AGM Date Jun 14 2012 Record Date Apr 17 2012 Dividend (%) 0.00 Bonus Issue n/a Price Sensitive Information
Financial Performance Basic EPS Performan ce Year Based on Including Continuing Extraoperations Ordinary Income -13.92 NA -18.88 3.04 17.14 NA NA NA NA NA 0 NA NA NA Basic EPS (restated) Based on Continuing operations 0 0 0 0 NA NA NA Including ExtraOrdinary Income NA NA NA 0 NA NA NA Net Asset Restated Net Profit% Dividend Value PerNet AssetAfter Tax Share Value Per(mn) Share Including Continuing Extraoperations Ordinary Income 68.31 0 -808.4 NA 0 56.03 59 76.3 NA NA NA 0 0 0 NA NA NA -1096.53 176.53 995.56 NA NA NA NA NA 0 NA NA NA 0 0 0 NA NA NA % Yield Dividend

2006 2007 2008 2009 2010 2011 2012

0 0 0 0 NA NA

NA

Last One Month Close Price and Traded Volume Graph

Closing Price Total Trade Highest value Lowest value Date From : 27 Date To : 27 Trading Days : 23 : : May, Jun,

E(Ra) = REF + (Rm REF) = .1165 - .08382 (.125 - .1165) = .1165 - .08382 * .0085 = .1165 - .000712 =.11578 = 11.58%

As state, these are the required rate rates of return that these stocks should provide based on their systmatic risks and the prevailing SML. Stock Ahas lower risk than the aggregate market ,so the required rates of return lower than market return.And another four stock has negative beta ,so their required rates of return below the RFR(11.65)%.It is proved that risky assets poovide higher return when also ri

Chapter ELEVEN
ESTIMATED FUTURE RATE OFRETURN & STOCK VALUATION

Estimated future rate of return: Aramit Cement (A) = = = .1375 = 13.75% Meghna Cement (B) = = = .1129 = 11.29%

Confidence Cement (C) = = = .1826 = 18.26% Heidelberg Cement (D) = = = .0308 = 3.08%

Surma Cement (E)

= = = .125 = 12.5%

Assume that analysts in a major trust department have been following these five stocks.Based on extensive fundamental analysis, the analysts provide the expected price and dividend .Given these projection, we can compute the estimated rates of return the analysts would anticipate during this holding period.

Stock Valuation Stoc k A B C D E Beta 0.076937 38 0.050533 6 0.088650 36 0.021589 16 0.083822 77 Required Return E(R) 11.72% 11.69% 11.57% 11.63% 11.58% Estimate d Return 13.75% 11.29% 18.26% 3.08% 12.50% Estimated Return Minus Evaluation E(R) Under 2.03 valued Proper - 0.40 valued 6.69 - 8.55 0.92 Under valued Over valued Proper valued

Above table summarizes relationship between the required rate of return for each stock based on its systematic risk as compute earlier, and its dividend outlook.This difference between estimated return and required return is sometimes referred to as a stocks alpha or its excess return.Thise alpha can be possitive (the stock is undervalued) or negative (the stock is overvalued).If the alpha is zero, the stock is on the SML and is properly valued in line with its systematic risk.

RECOMONDATION & CONCLUSION

Chapter -Twelve

Recommendation There are some steps by the companies and CSE can initiate for its
better development: 1. Company ensure the stock holder right properly. 2. They need to try declar maximum dividend.As a result general investor attracted to stock market than other investment sector. 3. The company must be arrenge regular AGM as a result general investor able to about the company. 4. The company should not be moniplied the stock price. 5. CSE should build favorable environment for the prospective investors like,
introducing new concept such as equity, derivatives, debt to attract the investors 6. Creating awareness to the general public about stock market through media (satellite TV). 7. CSE should take initiative to rank the publicly traded company per month based on their monthly performance. 8. Obtaining monthly workshop or training for the investors.

Conclusion
After a well theoretical, analytical and mathematical clarification I would like to opinion Aramit Cement and confidence cement will more profitable that thise five cement companiesFrom .Meghna Cement and Surma Cement have to chance regular profit.But Heidelberg Cement is risky asset for investor becouse of overvalued.Finaly I would like to say invest for long time in stock market have to chance better profit. Also I want to say that CSE has been taken initiative for enrichment of this sector. In earlier time, few people even were investing in stockmarket.But now days the scenario has been changed, not only the potential investor now even the general public is also involved in this arena for example: especially the students are doing this sort of business.Although present stock market situation is not well for the general investor.It is not real scenary of stock market.The general investor hopfully, Government, SEC, DSE, CSE , and other party will take proper steps to return healthy invirinment in stock market.