JOHN HANCOCK FINANCIAL OPPORTUNITIES FUND - NOTICE TO SHAREHOLDERS - SOURCES OF DISTRIBUTION UNDER SECTION 19(a)
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Insights
The distribution announcement by John Hancock Financial Opportunities Fund is a critical piece of information for both current and potential investors, as it directly relates to the fund's performance and the return on investment. The substantial portion of the distribution coming from net realized long-term capital gains (76% of the current distribution) suggests the fund has successfully realized gains from its investments over the long term, which is generally seen as a positive indicator of fund management and strategy.
However, the annualized current distribution rate of 9.75% compared to the average annual total return of 2.24% over the past five years raises questions about sustainability. This discrepancy could indicate that the high distribution rate may not be fully supported by the fund's long-term performance and might include a significant return of capital, which can erode the fund's asset base over time if it becomes a consistent pattern.
Furthermore, the -12.55% cumulative total return relative to NAV for the fiscal year signals a downturn in the fund's performance, which could be a concern for investors focused on capital appreciation. The fund's strategy and market conditions should be analyzed to understand the implications of this performance gap.
Examining the fund's distribution components provides insight into the broader economic environment. A high proportion of distribution from long-term capital gains could reflect favorable market conditions that allowed for profitable exits from long-standing investments. However, it's essential to consider the broader market trends and how they might affect the fund's future performance, especially in light of the negative cumulative total return for the fiscal year.
Investors should also be cognizant of the fund's distribution policy in the context of the overall market. A managed distribution plan may aim to provide shareholders with a predictable income stream, but it's crucial to assess whether the distributions are in line with the actual earnings and realized gains of the fund to ensure that they are not depleting the fund's capital over the long term.
The distribution data can serve as an economic indicator, reflecting the performance of the financial sector in which the fund invests. The net investment income and capital gains portions of the distribution are reflective of the underlying assets' yields and appreciation, respectively. The absence of a return of capital in the current distribution is a positive sign, indicating that the payouts are not eroding the principal value of the investments.
However, the fund's performance relative to its NAV suggests a disconnect between the distribution yield and the fund's net asset value performance. This could imply that the fund's assets are not appreciating at a rate that supports the high distribution yield, which may not be sustainable in the long run without corresponding asset growth.
Notification of Sources of Distribution
This notice provides shareholders of the John Hancock Financial Opportunities Fund (NYSE: BTO) with important information concerning the distribution declared on December 1, 2023, and payable on December 29, 2023. No action is required on your part.
Distribution Period: December 2023
Distribution Amount Per Common Share:
The following table sets forth the estimated sources of the current distribution, payable December 29, 2023, and the cumulative distributions paid this fiscal year to date from the following sources: net investment income; net realized short term capital gains; net realized long term capital gains; and return of capital or other capital source. All amounts are expressed on a per common share basis and as a percentage of the distribution amount.
For the period 10/1/2023-12/31/2023
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For the fiscal year-to-date period 1/1/2023-12/30/2023 1
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Source | Current Distribution ($) | % Breakdown of the Current Distribution | Total Cumulative Distributions ($) | % Breakdown of the Total Cumulative Distributions | ||||
Net Investment Income | 0.1041 | 16 % | 0.4370 | 17 % | ||||
Net Realized Short- Term Capital Gains | 0.0509 | 8 % | 0.1009 | 4 % | ||||
Net Realized Long- Term Capital Gains | 0.4950 | 76 % | 1.5934 | 62 % | ||||
Return of Capital or Other Capital Source | 0.0000 | 0 % | 0.4495 |
17 % | ||||
Total per common share | 0.6500 | 100 % | 2.5808 | 100 % | ||||
Average annual total return (in relation to NAV) for the 5 years ended on November 30, 2023 | 2.24 % | |||||||
Annualized current distribution rate expressed as a percentage of NAV as of November 30, 2023 | 9.75 % | |||||||
Cumulative total return (in relation to NAV) for the fiscal year through November 30, 2023 | -12.55 % | |||||||
Cumulative fiscal year-to-date distribution rate expressed as a percentage of NAV as of November 30, 2023 | 9.68 % |
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You should not draw any conclusions about the Fund's investment performance from the amount of this distribution or from the terms of the Fund's managed distribution plan.
The Fund estimates that it has distributed more than its income and net realized capital gains; therefore, a portion of your distribution may be a return of capital. A return of capital may occur, for example, when some or all of the money that you invested in the Fund is paid back to you. A return of capital distribution does not necessarily reflect the Fund's investment performance and should not be confused with "yield" or "income."
The amounts and sources of distributions reported in this Notice are only estimates and are not being provided for tax reporting purposes. The actual amounts and sources of the amounts for tax reporting purposes will depend upon the Fund's investment experience during the remainder of its fiscal year and may be subject to changes based on tax regulations. The Fund will send you a Form 1099-DIV for the calendar year that will tell you how to report these distributions for federal income tax purposes.
The Fund has declared the December 2023 distribution pursuant to the Fund's managed distribution plan (the "Plan"). Under the Plan, the Fund makes fixed quarterly distributions in the amount of
If you have questions or need additional information, please contact your financial professional or call the John Hancock Investment Management Closed-End Fund Information Line at 1-800-843-0090, Monday through Friday between 8:00 a.m. and 7:00 p.m., Eastern Time.
Statements in this press release that are not historical facts are forward-looking statements as defined by
An investor should consider a Fund's investment objectives, risks, charges and expenses carefully before investing.
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SOURCE John Hancock Investment Management
FAQ
What is the quarterly distribution announced by John Hancock Financial Opportunities Fund (NYSE: BTO)?
When is the distribution payable to shareholders of record?
What are the sources of the distribution declared on December 1, 2023?
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