January 22, 2016

RETAIL RESEARCH

Systematic Transfer Plan (STP) in Mutual Funds

Systematic Transfer Plan (STP) is a facility provided by the mutual fund companies allowing investors to invest a lump sum amount in one scheme and transfer
regularly a pre-defined amount into another scheme.
The scheme that is considered for lump sum investment is called as source scheme or transferor scheme and the scheme to which the amount is transferred is called
as destination scheme or target scheme or transferee scheme.
How does it work?
Firstly, the investor has to choose a source scheme to invest lump sum. Though many of AMCs allow to choose equity funds also as source scheme (except close ended
and lock-in schemes), it is advisable to consider Liquid or Ultra Short Term schemes as they do not carry any exit load. Investors with high risk appetite can opt equity
schemes as source scheme, wait and start STP once the exit load period of the source scheme is over. Now, the investor can choose a target scheme and start to
transfer a fixed amount at a regular period. The target scheme may be Equity, Hybrid or debt schemes based on the investors objectives.
Suitable for:

Investors who want to invest lump sum money in schemes with stable returns and graduallyallocatesmall amounts to equity schemes in order to avail of the
potential for higher growth through equities.

Investors with lump sum money who want to invest systematically in equity mutual fund schemes especially during volatile equity market conditions and in the
meanwhile earn riskfree returns by investing in liquid/ultrashort term schemes.

Investors who want to rebalance the asset allocation of their portfolio gradually.

Key points:

Ideally speaking, the investor has to choose the target schemes first as the scheme should be a better performing one. None of the AMCs allow intra AMC
transfer. So both, target scheme and source scheme should be from the same AMC.

Most of the AMCs offer STP in two variants; 1. Normal STP and 2. Capital Appreciation STP. The normal STP is a plain vanilla STP wherein the investor is allowed
to specify the particular amount that to be redeemed from the source scheme to transfer to the target scheme. Under Capital Appreciation STP, the investor
will be eligible to transfer the entire capital appreciation amount that appreciated during the period. The Capital Appreciation STP available only under the
Growth plans for most of the AMCs.

RETAIL RESEARCH

Apart from these, many AMCs offer customized value added STP such as Dividend Transfer Plan, Flexi STP, etc. to the investors.

AMCs offer different interval options to transfer the units such as daily, weekly, fortnightly, monthly and quarterly. The interval options such as weekly,
fortnightly, monthly and quarterly have the specific dates for the transfer. Many of the AMCs do not provide fortnightly option. In some cases, daily option too.

The minimum number of transfer varies among AMCs and the interval chosen. For eg, in Birla Sun Life Mutual Fund, the minimum no. of transfers is 20 in case
of Daily STP while 12 in HDFC MF (if the amount is less than Rs. 1,000). Likewise, the minimum transferable amount is also varies among the AMCs.

The investor has to bear the exit loads if any while selling the source schemes. In this case, the load structure prevalent at the time of enrolment shall govern
the investors during the tenure of the STP.

Taxation also plays an important role on STP transaction. The redemption of units of the source scheme attracts Short term capital gain tax (STCG) which is 15%
in equity oriented funds if redeemed within one year and as per the investors tax slab in debt oriented funds if redeemed within 3 years. On the other hand,
Long term capital gain tax is levied such redemption if the units of debt oriented schemes at 20% with indexation sold after 3 years. The LTCG tax is nil in case of
equity oriented scheme if the units are sold after a year.

A minimum period of 7 to 10 working days shall be required for registration under STP. Units will be allotted/redeemed at the applicable NAV of the respective
dates of the Scheme on which such investments/withdrawals are sought from the Scheme.

STP will terminate automatically if all units are liquidated or withdrawn from the account or upon the Funds receipt of notification of death or incapacity of the
Unit holder. Further, in case where the balance amount in a folio is less than the STP amount, the entire amount will be transferred to the transferee scheme.

The requests for discontinuation of STP shall be subject to an advance notice of 10 to 15 days before the next due date for STP.

If STP date/day is a non-Business Day, then the next Business Day shall be the STP Date / Day and the same will be considered for the purpose of determining
the applicability of NAV.

If during running of a STP, the unit holder changes the plan or option in which he/she had invested, the same would be treated as termination of existing STP
and re-registration of a new STP and all the terms and conditions of the STP such as minimum term/amount etc. shall apply in both plans/options.

Difference between SIP and STP: STP is a variant of SIP. In SIP, the amount is transferred from the investors account to an assets (i.e. into a mutual fund) while
in STP, the investment amount is transferred from one asset or asset type into another asset or asset type. The transfer happens gradually over a period.
Further, the STP involves SWP also as a defined sum or units are sold at regular interval.

RETAIL RESEARCH

How can one benefit from STP route?

STP will make sense if the lump sum is invested in debt schemes (source scheme) and the transfer done in equity or Hybrid schemes (destination scheme). It is
worth noting that most of the AMCs allow equity schemes also as source schemes. However, considering debt funds such as Liquid funds and Ultra Short Term
funds as source schemes will not attract any exit load. The investors who consider equity schemes as source schemes can start the STP once the exit load period
is over. Thus, there is no exit load charges for these transfer.

The investors can use STP route to transfer the invested amount with the ELSS schemes once the lock-in period of 3 years is over. The amount that laid with
ELSS can be transferred to equity or debt schemes based on the investors objective.

Investors can consider STP route to rebalance the asset allocation of their portfolio by starting debt to equity or vice versa for the span 6 month to one year.

Further, STP route can be considered to take advantage of the market conditions. When the market is traded at high levels, the investors can consider the STP
transfer from equity to debt and vice versa.

When will STP not work? Incase markets are already at the end of a Bear market and markets can starts it upmove anytime, in that case STP will not deliver the best
returns like SIP. However, stay or keep investing over long run will give the better results.
STP details of some of Top Mutual Funds:
Target scheme

Remarks

Click the link to

download the STP
application form

All open ended Equity,

Balanced and MIP
Schemes.

Weekly, Monthly and Quarterly frequencies are

available. Daily frequency is available with few equity
schemes.Attracts exit load.

Link

Daily, Weekly, Monthly and Quarterly frequencies are

available. No exit load.

Link

Daily, Weekly, Monthly and Quarterly frequencies are

available. However, exit load is applicable.

Link

Daily, Weekly, Monthly and Quarterly frequencies are

available. However, exit load is applicable.

Link

Daily, Weekly, Monthly and Quarterly frequencies are

available. However, exit load is applicable.

Link

Source schemes
AMC
Scheme

Category

Birla Sun Life Cash Manager (G)

Birla Sun Life Cash Plus - Retail (G)
Birla Sun Life Floating Rate - STP - Retail(G)
Birla Sun Life Savings Fund - Retail (G)
Franklin India TMA - Reg (G)
Franklin India Ultra-Short Bond (G)
Franklin India Cash Management Account (G)

Ultra Short Term Funds

Liquid Funds
Floating Rate Income Funds
Short Term Income Funds
Liquid Funds
Ultra Short Term Funds
Liquid Funds

DSP BR

All schemes except lockin and close ended

schemes

Mirae

Mirae Asset Cash Management Fund (G)

Mirae Asset Short Term Bond Fund (G)
Mirae Asset Ultra Short Term Bond (G)

Liquid Funds
Short Term Income Funds
Ultra Short Term Funds

Reliance

All schemes except lockin and close ended

schemes

Birla

Frankiln

RETAIL RESEARCH

All open ended Equity,

Balanced and MIP
Schemes.
All open ended Equity,
ELSS, Balanced, MIP
and debt Schemes.
All open ended Equity,
ELSS, Balanced& MIP
Schemes.
All open ended Equity,
ELSS, Balanced, MIP
and debt Schemes.

HDFC

All schemes except lockin and close ended

schemes

Axis

All schemes except lockin and close ended

schemes

ICICI

All debt and MIP schemes

UTI

All debt schemes

All Debt categories

TATA

All schemes except lockin and close ended

schemes

All open ended Equity,

ELSS, Balanced, MIP
and debt Schemes.
All open ended Equity,
ELSS, Balanced, MIP
and debt Schemes.
All open ended and
non-lock in equity,
Hybrid and Debt
schemes
All open ended and
non-lock in equity,
Hybrid and Debt
schemes
All open ended and
non-lock in equity,
Hybrid and Debt
schemes

Daily, Weekly, Monthly and Quarterly frequencies are

available. However, exit load is applicable.

Link

Daily, Weekly, Monthly and Quarterly frequencies are

available. However, exit load is applicable.

Link

Daily, Weekly, Monthly and Quarterly frequencies are

available. However, exit load is applicable.

Link

Daily, Weekly, Monthly and Quarterly frequencies are

available. However, exit load is applicable.

Link

Daily, Weekly, Monthly and Quarterly frequencies are

available. However, exit load is applicable.

Link

Analyst: Dhuraivel Gunasekaran (dhuraivel.gunasekaran@hdfcsec.com) Source: AMC sites

RETAIL RESEARCH Tel: (022) 3075 3400 Fax: (022) 2496 5066 Corporate Office
HDFC securities Limited, I Think Techno Campus, Building - B, "Alpha", Office Floor 8, Near Kanjurmarg Station, Opp. Crompton Greaves, Kanjurmarg (East), Mumbai 400 042 Phone: (022) 3075 3400 Fax: (022)
2496 5066 Website: www.hdfcsec.com Email: hdfcsecretailresearch@hdfcsec.com HDFC Securities Ltd. is a SEBI Registered Research Analyst having registration no. INH000002475."
Disclaimer: Mutual Funds investments are subject to risk. Past performance is no guarantee for future performance. This document has been prepared by HDFC Securities Limited and is meant for sole use by the
recipient and not for circulation. This document is not to be reported or copied or made available to others. It should not be considered to be taken as an offer to sell or a solicitation to buy any security. The
information contained herein is from sources believed reliable. We do not represent that it is accurate or complete and it should not be relied upon as such. We may have from time to time positions or options on,
and buy and sell securities referred to herein. We may from time to time solicit from, or perform investment banking, or other services for, any company mentioned in this document. This report is intended for nonInstitutional Clients
This report has been prepared by the Retail Research team of HDFC Securities Ltd. The views, opinions, estimates, ratings, target price, entry prices and/or other parameters mentioned in this document may or
may not match or may be contrary with those of the other Research teams (Institutional, PCG) of HDFC Securities Ltd.

RETAIL RESEARCH