Franklin Limited Duration Income Trust (“FTF” or the “Fund”) Announces Distribution

Rhea-AI Summary

Franklin Limited Duration Income Trust (FTF) announced a monthly distribution of $0.0615 per share from net investment income, payable on January 31, 2024, to shareholders of record on January 19, 2024. The Fund's Board of Trustees authorized a managed distribution plan to provide consistent monthly distributions and narrow the discount between market price and net asset value. However, there is no assurance of its success. The Fund may distribute long-term capital gains and/or return of capital if sufficient distributable income is not available. The Board may amend or terminate the Plan at any time, potentially affecting the market price of the Fund's common shares.

Insights

Financial Analyst

The announcement by Franklin Limited Duration Income Trust regarding its monthly distribution from net investment income is a pivotal piece of information for shareholders and potential investors. This fixed distribution rate is a strategic move aimed at providing consistent returns and potentially narrowing the discount between the market price and the net asset value (NAV) of the Fund's common shares. The ability to sustain such distributions is contingent upon the Fund's operational performance, particularly its capability to generate sufficient net ordinary income and short-term capital gains.

Investors should be aware that the use of long-term capital gains and return of capital as a source for distributions, when distributable income is insufficient, could indicate that the Fund is not generating enough investment income. A return of capital can reduce the Fund's assets, which may affect future income and long-term growth potential. It is also critical to understand that a return of capital is not an indication of the Fund's performance and differs from yield or income derived from the Fund's investments.

The Board's authority to amend or terminate the managed distribution plan without prior notice adds a layer of uncertainty and could impact the market price of the Fund's common shares. The Plan's periodic review by the Board, including the yearly review of the fixed rate, is an essential oversight mechanism that could lead to adjustments based on the Fund's performance and market conditions.

Market Research Analyst

From a market perspective, Franklin Limited Duration Income Trust's distribution plan is a tactical approach to attract and retain investors seeking regular income streams. The fixed rate distribution strategy could appeal to income-focused investors, especially in a low-interest-rate environment or during periods of market volatility. However, the effectiveness of this strategy in narrowing the NAV discount is not guaranteed and requires careful monitoring.

Investors often perceive a narrowing of the NAV discount as a positive signal, potentially leading to increased demand for the Fund's shares. Conversely, if the Plan fails to narrow the discount or is terminated, it could negatively impact investor sentiment and share price. The Fund's strategy of balancing distributions from net ordinary income, short-term capital gains and potentially long-term capital gains or return of capital, reflects a broader trend among income funds to maintain attractive distribution rates amid varying market conditions.

It is important for investors to review the Fund's distribution components, as over-reliance on return of capital could suggest a lack of sustainable income, which may not align with long-term investment objectives. The mention of capital loss carryovers is also noteworthy, as it indicates past losses that can offset current gains and affect the Fund's taxable distributions.

Tax Advisor

For tax-conscious investors, the structure of the Franklin Limited Duration Income Trust's distributions is of considerable importance. The differentiation between net ordinary income, short-term capital gains, long-term capital gains and return of capital has significant tax implications. Distributions classified as return of capital are generally not taxed until the shareholder's cost basis in the shares is recovered, which can be advantageous for tax planning.

However, investors must be vigilant about the potential for return of capital to erode their investment in the Fund. The mention of capital loss carryovers is relevant for understanding the Fund's tax position, as these carryovers can reduce the Fund's taxable income and thereby impact the character of distributions to shareholders. It is crucial for investors to consult with tax professionals to understand how these distributions affect their individual tax situations, especially considering the potential for the Plan's terms to change or for the Plan to be terminated.

SAN MATEO, Calif.--(BUSINESS WIRE)-- FRANKLIN LIMITED DURATION INCOME TRUST [NYSE American: FTF] today announced a monthly distribution from net investment income of $0.0615 per share, payable on January 31, 2024, to shareholders of record on January 19, 2024 (Ex-Dividend Date: January 18, 2024).

The Fund’s Board of Trustees (the “Board”) has authorized a managed distribution plan (the “Plan”) pursuant to which the Fund makes monthly distributions to shareholders at the fixed rate of $0.0615 per share. The Plan is intended to provide shareholders with consistent distributions each month and is intended to narrow the discount between the market price and the net asset value (“NAV”) of the Fund’s common shares, but there can be no assurance that the Plan will be successful in doing so. The Fund is managed with a goal of generating as much of the distribution as possible from net ordinary income and short-term capital gains, that is consistent with the Fund’s investment strategy and risk profile. To the extent that sufficient distributable income is not available on a monthly basis, the 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 may amend the terms of the Plan or terminate the Plan at any time without prior notice to the Fund’s shareholders. The amendment or termination of the Plan could have an adverse effect on the market price of the Fund’s common shares. The Plan will be subject to the periodic review by the Board, including a yearly review of the fixed rate to determine if an adjustment should be made.

Shareholders should not draw any conclusions about the Fund’s investment performance from the amount of the current distribution or from the terms of the Plan. The amounts and sources of distributions reported herein 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 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.

For further information on Franklin Limited Duration Income Trust, please visit our web site at: www.franklintempleton.com

Franklin Resources, Inc. is a global investment management organization with subsidiaries operating as Franklin Templeton and serving clients in over 150 countries. Franklin Templeton’s mission is to help clients achieve better outcomes through investment management expertise, wealth management and technology solutions. Through its specialist investment managers, the company offers specialization on a global scale, bringing extensive capabilities in fixed income, equity, alternatives and multi-asset solutions. With more than 1,300 investment professionals, and offices in major financial markets around the world, the California-based company has over 75 years of investment experience and over $1.4 trillion in assets under management as of November 30, 2023. For more information, please visit franklintempleton.com.

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Franklin Templeton, 1-800-342-5236

Source: Franklin Templeton

FAQ

What is the monthly distribution announced by Franklin Limited Duration Income Trust (FTF)?

Franklin Limited Duration Income Trust (FTF) announced a monthly distribution of $0.0615 per share from net investment income, payable on January 31, 2024, to shareholders of record on January 19, 2024.

What is the purpose of the managed distribution plan authorized by Franklin Limited Duration Income Trust (FTF)?

The managed distribution plan is intended to provide consistent monthly distributions and narrow the discount between market price and net asset value of the Fund's common shares.

What may happen if sufficient distributable income is not available for Franklin Limited Duration Income Trust (FTF)?

If sufficient distributable income is not available, the Fund may distribute long-term capital gains and/or return of capital to maintain its managed distribution rate.

What authority does the Board of Trustees have over the managed distribution plan of Franklin Limited Duration Income Trust (FTF)?

The Board of Trustees may amend or terminate the Plan at any time without prior notice to the Fund's shareholders, potentially affecting the market price of the Fund's common shares.