Franklin Limited Duration Income Trust (“FTF” or the “Fund”) Announces Notification of Sources of Distributions
- None.
- None.
Insights
The distribution announcement by Franklin Limited Duration Income Trust is a critical piece of information for stakeholders as it provides insight into the fund's performance and payout strategy. The distribution comprises net investment income, realized capital gains and return of capital. The net investment income reflects the fund's ability to generate earnings from its investments, which is a key indicator of its operational efficiency. The realized capital gains, both short-term and long-term, indicate the fund's success in capitalizing on investment opportunities and actively managing its portfolio.
However, the mention of a cumulative loss and unrealized depreciation of portfolio securities is concerning. This suggests that the fund's investments have decreased in value but have not been sold, which could impact future distributions. Investors typically prefer funds that consistently grow their capital and a decline in value could affect investor confidence and the fund's stock price. The return of capital component also implies that part of the distribution is not from income or capital gains but from the investors' original investment, which might not be sustainable in the long run.
From a taxation perspective, the composition of Franklin Limited Duration Income Trust's distribution is significant for shareholders. The portion classified as net investment income will typically be taxed at the ordinary income rate, while the realized capital gains could be subject to lower tax rates, depending on the holding period of the underlying securities. The absence of long-term capital gains in the distribution is notable, as these are often taxed more favorably than short-term gains.
Moreover, the return of capital is not immediately taxable; instead, it reduces the shareholder's cost basis in the investment, potentially increasing the capital gain or reducing a loss upon sale of the shares. This has implications for investors' after-tax returns and can influence investment decisions, particularly for those in higher tax brackets or with significant investments in the fund.
Analyzing the market implications of the distribution, the Franklin Limited Duration Income Trust's allocation strategy reflects broader market conditions. The fund's performance, as indicated by the cumulative loss, may be tied to market volatility or sector-specific downturns. The reliance on return of capital to sustain distributions could be a red flag for market analysts, as it may signal that the fund's income-generating assets are underperforming.
Additionally, the fund's ability to generate income and realized gains is a critical factor in its attractiveness to income-focused investors. A shift in these components over time can indicate changes in the fund's investment strategy or response to market conditions, which can affect investor sentiment and fund inflows. The fund's performance relative to its peers and benchmarks will also be scrutinized to assess its competitive position in the market.
Notification of Sources of Distributions Pursuant to Section 19(a) of the Investment Company Act of 1940 |
The Fund’s estimated sources of the distribution to be paid on February 29, 2024 and for the fiscal year 2024 year-to-date are as follows:
Estimated Allocations for February Monthly Distribution as of January 31, 2024:
Distribution Per Share |
Net Investment Income |
Net Realized Short-Term Capital Gains |
Net Realized Long-Term Capital Gains |
Return of Capital |
|
|
|
|
|
Cumulative Estimated Allocations fiscal year-to-date as of January 31, 2024, for the fiscal year ending December 31, 2024:
Distribution Per Share |
Net Investment Income |
Net Realized Short-Term Capital Gains |
Net Realized Long-Term Capital Gains |
Return of Capital |
|
|
|
|
|
The Fund has experienced a cumulative loss in undistributed net realized and unrealized capital gains and losses totaling
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 Fund’s Plan. FTF estimates that it has distributed more than its income and net realized capital gains; therefore, a portion of the FTF distribution to shareholders may be a return of capital. A return of capital may occur, for example, when some or all of the money that a shareholder invested in a Fund is paid back to them. A return of capital distribution does not necessarily reflect FTF’s investment performance and should not be confused with ‘yield’ or ‘income’. 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.
Average Annual Total Return (in relation to the change in net asset value (NAV) for the 5-year period ended on 1/31/2023)1 |
Annualized Distribution Rate (as a percentage of NAV for the current fiscal period through 1/31/2023)2 |
Cumulative Total Return (in relation to the change in NAV for the fiscal period through 1/31/2023)3 |
Cumulative Fiscal Year-To-Date Distribution Rate (as a percentage of NAV as of 1/31/2023)4 |
|
|
|
|
Fund Performance and Distribution Rate Information:
- Average Annual Total Return in relation to NAV represents the compound average of the Annual NAV Total Returns of the Fund for the five-year period ended through January 31, 2024. Annual NAV Total Return is the percentage change in the Fund’s NAV over a year, assuming reinvestment of distributions paid.
- The Annualized Distribution Rate is the current fiscal period’s distribution rate annualized as a percentage of the Fund’s NAV through January 31, 2024.
- Cumulative Total Return is the percentage change in the Fund’s NAV from December 31, 2023 through January 31, 2024, assuming reinvestment of distributions paid.
- The Cumulative Fiscal Year-To-Date Distribution Rate is the dollar value of distributions for the fiscal period (December 31, 2023 through January 31, 2024), as a percentage of the Fund’s NAV as of January 31, 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
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.
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 1,400 investment professionals, and offices in major financial markets around the world, the
View source version on businesswire.com: https://www.businesswire.com/news/home/20240228492441/en/
Franklin Templeton, 1-800-342-5236
Source: Franklin Templeton
FAQ
What are the estimated sources of distribution announced by Franklin Limited Duration Income Trust (FTF)?
What is the distribution per share for February 2024 as per the announcement?
What percentage of the distribution per share for February 2024 is attributed to net investment income?
Has Franklin Limited Duration Income Trust (FTF) experienced any cumulative loss in undistributed net realized and unrealized capital gains and losses?
