Fixed Maturity Plans

Fixed Maturity PlansFixed Maturity Plans

MFS Presentation

By:Robin KapoorDeepak KumarSourabh GargPankaj JainPrateek NaharVikas SharmaTushar Garg

• Close Ended funds• Investment made in• Predefined maturity period• Collects money from investors and invest

in bonds• Several advantages• Exit Load

Common things to understand

• FMP has dividend option?• FMP returns assured?• Availability and Loads?• Is premature withdrawal allowed?• Do NAV move Sharply?• Does FMP have equity component?

• Capital Gain

• Tax Advantage– Lower tax in comparison with

FD

– Dividend is tax free(14.165%)

Indexation Benefit

• Index cost = Y * index cost of the year of maturity/ inflation index of that year

Comparison With FD

Problems occurring

• Disclosure norms• Maturity mismatch• Interest rate risk• Compromise on credit quality

Solution to Problems

• Strict Portfolio disclosure norms• Mention the maturity period of underlying

asset• Invest in good credit rating companies only

Current Scenario

• SEBI Guidelines– Upto 6% exit load is allowed– Only 15-20% in single company

• Liquidity Problem• HNI investors taking money out• Recession fear• NAV Problem

Examples-1Current FMP

ICICI Prudential FMP Series 48 - 3 Years Plan BIndexation Benefit Available! Opens on: 03rd November'08 Closes on: 05th December'08

Type of scheme A Close-Ended Debt Fund

New fund offer price Rs.10/- per units

Allotment Date 12th December, 2008

Maturity Date 12th December, 2011

Tenor of the scheme 1095 days

Indicative YieldRetail Plan: 10 to 10.50%Institutional Plan: 10.50 to 11%

Entry Load Nil.

Exit Load

If the amount sought to be redeemed is invested for a period of one year Or less than one year from the date of allotment: 3%If the amount sought to be redeemed is invested for a period of more than one year from the date of allotment but redeemed before the date of maturity of the Scheme: 2%

Minimum application amountRetail Plan: Rs.5,000/-Institutional Option: Rs.25,00,000/-

Investment objectiveTo seek to generate returns by investing in a portfolio of fixed income securities/ debt instruments normally maturing in line with the time profile of the Plan.

Example-2

What should investor watch for?

• Be aware of risks• Choice of investment• Reputed fund house• Don’t get attracted by high returns• Ask for portfolio• Credit rating of companies

Robin KapoorDeepak KumarSourabh GargPrateek NaharPankaj JainVikas SharmaTushar Garg