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HDFC Mutual Fund has announced the merger of three Fixed Maturity Plan (FMP) - HDFC FMP- Series 42-1381D September 2018 (1), HDFC FMP- Series 42-1372D September 2018 (1) with HDFC Corporate Bond Fund and HDFC FMP- Series 43-1344D October 2018 (1) with HDFC Medium Term Debt Fund.

The effective date of the merger for the first two FMPs is June 30, 2022 and for the third FMP mentioned above, the date of the merger is June 28, 2022.

As per SEBI categorisation of funds, corporate bond funds invest in 80% of total assets only in the highest-rated corporate bonds. While the medium duration fund makes investments in debt & money market instruments such that the macaulay duration of the portfolio is between 3 years – 4 years.

As per the addendum released by the fund house, “the merger will be tax-efficient as there will be no capital gains on them on maturities and investors can continue to avail of the indexation benefits till the time they choose to remain invested. Further, the unitholders are free to choose their date of redemption any time after the merger to meet their liquidity requirements."

As per the fund house, post-merger, there will be no change in features of HDFC Corporate Bond Fund and HDFC Medium Term Debt Fund after the merger. 

The unitholders of the schemes that are getting merged having no objection to the proposed merger and wishing to remain invested need to provide consent. Once consent is provided, investors are deemed to have read and provided the confirmations and declarations as per the consent form. 

The period of consent for funds merging into HDFC Corporate Bond Fund and HDFC Medium Term Debt Fund are May 27, 2022 to June 27, 2022 and May 25, 2022 to June 23, 2022 respectively. 

On the other hand, units of the unitholders who do not provide their consent for the merger will be redeemed at applicable NAV on the maturity date.

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