Fixed Maturity Plan

FixedMaturity Plan

Attractive Interest Yield
Provide Stability to the portfolio


A Fixed Maturity Plan (FMP) is a closed-ended debt scheme, wherein the maturity of underlying debt instruments is aligned with the tenure of the scheme. So a one-year FMP will invest in debt instruments that mature in one year or just before this period. FMPs generally invests in money market instruments, certificate of deposits (CDs), commercial papers (CPs) and corporate bonds.
The fund is open for subscription only during New Fund Offer (NFO) period at the time of launch of the scheme.


What is Fixed Maturity Plan?

Fixed Maturity Plans are ideal for investors of all risk profiles (conservative / Moderate /Aggressive) having investment horizon that matches with the tenure of the FMP.
Features of Fixed Maturity Plan

• Risk-Return: Returns from FMPs are relatively stable, though not guaranteed. They invest in instruments with a maturity profile matching that of the fund, and the instruments are typically held till maturity.Hence any change in interest rates in the interim period does not affect the value of the fund.
• Wide Maturities: FMPs are available with numerious maturityoptions like 1 month, 3 months, 6 months, 1 year, 3 years, 5 years etc. An investor can invest in the relevant plan depending upon his investment horizon and the requirement of cash flows on maturity.
• Lower cost:FMPs involve minimum expenditure on fund management, as there is no requirement for a time-to-time review by fund managers. Since these instruments are held till maturity, there is also a cost saving in respect of buying and selling of debt instruments.
• Liquidity: FMPs are closed endedin nature and the maturity proceeds are available at the end of the tenure. FMPs are also listed on the stock exchanges for secondary market trade, but mostly they are illiquid. Henceinvestors should choose FMPs that match their investment horizon.
• Dividend Distribution Tax (DDT): Dividends are tax free in the hands of investors. However, fund houses need to pay dividend distribution tax of 28.325% (25%+10% surcharge+3% Cess) at source.
• Short Term Capital Gain (STCG): Investment for a period of upto12 months qualify for short-term capital gains. STCG is taxed at marginal rate of taxation.
• Long Term CapitalGain (LTCG): Investment for a period of more than 12 months qualify for long-term capital gains. LTCGis 10% without indexation or 20% with indexation whichever is lower, Plus 10% surcharge plus 3% cess.
• Taxation: As per tax rates applicable for Individual/HUF for FY2013-14, applicable from Jun 1, 2013

Who should invest?

Mutual Fund investments are subject to market risk. Please read the scheme information document and statement of additional information carefully before investing.

Outlook

The yields are elevated across the term structure. FMPs provide an opportunity for investors to lock-in at these yields and provide stability to his portfolio in the current volatile markets.
An investor will have to choose the FMPs with tenure that match his investment horizon.