Franklin Templeton Fund Adviser, LLC Announces Distributions for Certain Closed-End Funds Pursuant to their Managed Distribution Policy for the Months of March, April and May 2024
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Insights
The announcement of distribution payments by Franklin Templeton Fund Adviser, LLC for their closed-end funds is a noteworthy event for investors, particularly those interested in income-generating investments. The consistency of the distributions at $0.05000 for the Western Asset Inflation-Linked Income Fund and $0.06050 for the Western Asset Inflation-Linked Opportunities & Income Fund over the three-month period indicates a stable income stream for shareholders.
From a financial perspective, the composition of the distributions is significant. With a substantial portion classified as income and the remainder as a return of capital, it's clear that the funds are generating income from their investments. However, the return of capital component suggests that not all distributions are from income, which could be a point of concern over the long term if it indicates that the fund is not generating enough income to cover distributions and is instead returning investors' principal.
Another aspect to consider is the impact of the managed distribution policy on the funds' market price. Should the board decide to modify, terminate, or suspend this policy, there could be implications for the funds' attractiveness to investors and consequently their market valuation. Investors should monitor such policy changes closely as they could affect future income streams and the overall investment thesis.
Understanding the tax implications of distributions is crucial for shareholders. The breakdown between income and return of capital is particularly important. Income is typically taxed at ordinary income rates, whereas return of capital is not immediately taxable but reduces the shareholder's cost basis in the investment. This can lead to higher capital gains taxes when the shares are sold.
The fact that the funds have capital loss carryovers is also noteworthy. These carryovers can offset capital gains, potentially reducing the taxable distributions in the current year. This might be attractive to tax-sensitive investors who are looking to minimize their current tax liability.
However, investors should be aware that the estimated source of distributions is based on tax accounting records and factors in currency fluctuations, which can complicate the tax reporting process. Shareholders will receive a separate notice with the updated estimated components of the distributions when they are paid, which is essential for accurate tax reporting.
The distributions declared by Franklin Templeton are reflective of the broader economic context in which inflation-linked funds operate. These funds are designed to provide some protection against inflation, which is a key concern for investors in a volatile economic climate. The steady distribution amounts suggest that the funds are currently able to keep up with their objectives despite market fluctuations.
Investors often view closed-end funds with managed distribution policies as a source of regular income. The funds' ability to maintain these payments can be a draw for income-focused investors. However, the reliance on return of capital to maintain distribution rates can be a double-edged sword. While it ensures consistency in payments, it may also signal that the funds are depleting capital to fulfill their distribution promises, which could be unsustainable in the long run.
It's also important to note that the market's perception of the funds' sustainability and performance could be influenced by these distribution announcements. Any negative changes in the managed distribution policy or the funds' ability to generate income could lead to a reassessment of their value by the market.
The following dates apply to the distribution schedule below:
Month |
Record Date |
Ex-Dividend Date |
Payable Date |
March |
3/21/2024 |
3/20/2024 |
3/28/2024 |
April |
4/23/2024 |
4/22/2024 |
4/30/2024 |
May |
5/23/2024 |
5/22/2024 |
5/31/2024 |
Ticker |
Fund Name |
Month |
Amount |
|
Change from
|
WIA |
Western Asset Inflation-Linked Income Fund (a) |
March |
|
- |
|
|
|
April |
|
|
|
|
|
May |
|
|
|
WIW |
Western Asset Inflation-Linked Opportunities |
March |
|
|
- |
|
& Income Fund (a) |
April |
|
|
|
|
|
May |
|
|
|
(a) Please see table below for each Fund’s estimated source of distributions. |
|||||
Under the terms of each Fund’s managed distribution policy, each Fund seeks to maintain a consistent distribution level derived from the income and capital gains generated from the Fund’s investment portfolio. To the extent that sufficient distributable income is not available on a monthly basis, each Fund will distribute long-term capital gains and/or return of capital in order to maintain its managed distribution rate. A return of capital may occur, for example, when some or all of the money that was invested in the Fund is paid back to shareholders. A return of capital distribution does not necessarily reflect the Fund’s investment performance and should not be confused with “yield” or “income”. Even though the Fund may realize current year capital gains, such gains may be offset, in whole or in part, by the Fund’s capital loss carryovers from prior years. The Board of Trustees may modify, terminate or suspend the managed distribution policy at any time. Any such modification, termination or suspension could have an adverse effect on the market price of the Fund’s shares.
Based on the Funds’ tax accounting records, which also factor in currency fluctuations, each Fund’s estimated source of cumulative fiscal year-to-date distributions is presented in the table below:
Fund |
Fiscal
|
|
Income |
|
Short-Term
|
|
Long-Term
|
|
Return
|
|
WIA |
Nov 30 |
|
|
|
- |
|
- |
|
|
(a) |
WIW |
Nov 30 |
|
- |
- |
|
(a) |
||||
(a) Sources of cumulative fiscal year-to-date distributions are estimated through May 31, 2024. |
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The updated estimated components of the distributions announced today will be provided to shareholders of record in a separate notice when the distributions are paid.
Shareholders should not draw any conclusions about each Fund’s investment performance from the amount of these distributions or from the terms of each Fund’s managed distribution policy. The amounts and sources of each Fund’s distributions to be reported will be estimates and will not be provided for tax reporting purposes. The actual amounts and sources of the amounts for tax reporting purposes will depend upon each Fund’s investment experience during the remainder of its fiscal year and may be subject to changes based on tax regulations. Each Fund will send a Form 1099-DIV to shareholders for the calendar year that will describe how to report the Fund’s distributions for federal income tax purposes.
Franklin Templeton Fund Adviser, LLC (formerly known as Legg Mason Partners Fund Advisor, LLC) is an indirect,
wholly-owned subsidiary of Franklin Resources, Inc. (“Franklin Resources”).
For more information about the Funds, please call 1-888-777-0102 or consult the Funds’ website at www.franklintempleton.com/investments/options/closed-end-funds. Hard copies of the Funds’ complete audited financial statements are available free of charge upon request.
Data and commentary provided in this press release are for informational purposes only. Franklin Resources and its affiliates do not engage in selling shares of the Funds.
The Funds’ common shares are traded on the New York Stock Exchange. Similar to stocks, Fund share price will fluctuate with market conditions and, at the time of sale, may be worth more or less than the original investment. Shares of closed-end funds often trade at a discount to their net asset value, and can increase an investor’s risk of loss. All investments are subject to risk, including the risk of loss.
INVESTMENT PRODUCTS: NOT FDIC INSURED | NO BANK GUARANTEE | MAY LOSE VALUE
Category: Distribution Related
Source: Franklin Resources, Inc.
Source: Legg Mason Closed End Funds
View source version on businesswire.com: https://www.businesswire.com/news/home/20240220666232/en/
Investor Contact: Fund Investor Services 1-888-777-0102
Source: Franklin Resources, Inc. and Legg Mason Closed End Funds
FAQ
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What is the managed distribution policy for the funds?
How are the estimated sources of distributions presented?
What could be the impact of modifying, terminating, or suspending the managed distribution policy?
