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ICICI Pru mutual fund has announced that its board and the trustees have approved the merger of five Fixed Maturity Plans (FMPs), into ICICI Prudential Money Market Fund. 

The merging schemes are ICICI Prudential FMP Series 84 - 1272 Days Plan Q, ICICI Prudential FMP Series 84 - 1279 Days Plan P, ICICI Prudential FMP Series 84 - 1288 Days Plan O, ICICI Prudential FMP Series 84 - 1254 Days Plan U and ICICI Prudential FMP Series 84 - 1247 Days Plan W. 

The effective date of the merger will be the maturity date of each FMP, which is either May 30, 2022 or June 2/9, 2022.

Investors who agree with the merger proposal should give a consent form to the fund house. The consent period is open for one month starting from April 29, 2022 till the maturity of the fund.

Unitholders who do not submit the consent form will be deemed as not in agreement with the merger and will receive the redemption proceeds on the maturity date of the FMP. The maturity proceeds will attract the capital gains tax. 

Note that there will be no impact on the investments of existing investors in the ICICI Pru Money Market Fund. However, the existing investors in this fund are also given an option to exit, without any exit load, within the exit option period starting from April 29, 2022 till June 09, 2022 at applicable NAV.

The five FMPs currently have significant exposure to AAA-rated corporate bonds and sovereign securities. On the other hand, the money market fund that the FMPs will get merged into has good exposure to money market instruments such as commercial papers and certificate of deposit. 

 “In that case, there will be no major difference on the credit exposure front between existing FMPs and the money market fund," said Joydeep Sen, an independent debt market analyst. He also pointed out that investors who are not in need of immediate cash requirement can give their consent to the merger because of the tax benefits on the merger. 

As per the Income Tax Act, consolidation of schemes of mutual funds does not trigger tax implications. Thus, if funds are invested in the new scheme on the merger, there will be no capital gains impact on the investor now.

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