JOHN HANCOCK HEDGED EQUITY & INCOME FUND - REQUIRED NOTICE TO SHAREHOLDERS - SOURCES OF DISTRIBUTION UNDER SECTION 19(a)
- The Fund's average annual total return for the 5 years ended on November 30, 2023, was 4.30%.
- The cumulative total return for the fiscal year through November 30, 2023, was 5.77%.
- None.
Insights
The distribution announcement by John Hancock Hedged Equity & Income Fund is indicative of the fund's performance and strategy, which is particularly relevant for current and potential investors. The allocation of the distribution between net investment income, net realized capital gains and return of capital informs us of the fund's income-generating ability and capital appreciation, as well as its payout policy.
An annualized current distribution rate of 8.70% compared to an average annual total return of 4.30% over five years suggests a distribution rate that exceeds the fund's total return. This discrepancy might raise concerns about the sustainability of distributions, as a significant portion (67%) is classified as a return of capital, which can erode the fund's asset base over time if not offset by capital gains or income.
Investors should consider the long-term implications of this distribution structure, as consistent return of capital might indicate that the fund is not generating enough income or realizing sufficient capital gains to cover distributions. This could impact the fund's net asset value (NAV) and, subsequently, its share price.
The composition of distributions has tax implications for shareholders. The return of capital portion of the distribution (67% for the current period) is typically not taxable in the year received; instead, it reduces the shareholder's cost basis in the investment, potentially resulting in higher capital gains taxes when shares are sold.
However, the net investment income and net realized capital gains components are subject to different tax treatments. The low percentage of distribution from net realized capital gains (6% for the current period) could be favorable for shareholders seeking to minimize current taxable income. It's important for shareholders to understand these nuances to manage their tax liabilities effectively.
The distribution data provides insight into the fund's investment strategy and market positioning. A fund with a high return of capital percentage might be employing a defensive strategy, especially in volatile markets, preserving capital rather than realizing gains. This could be a deliberate approach to maintain steady distributions despite market conditions.
However, investors should assess whether such a strategy aligns with their investment goals. A high return of capital might not be ideal for those seeking growth through capital appreciation. Conversely, it might appeal to income-focused investors who prioritize regular cash flow, even if it comes at the expense of potential long-term NAV growth.
In the context of the fund's average annual total return and the cumulative fiscal year-to-date distribution rate, it is crucial for investors to monitor whether the fund's total returns can support the distribution rate without eroding the NAV over time.
Notification of Sources of Distribution
This notice provides shareholders of the John Hancock Hedged Equity & Income Fund (NYSE: HEQ) 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
| For the fiscal year-to-date period 1/1/2023-12/31/2023 1
| |||||||
Source | Current Distribution ($) | % Breakdown | Total Cumulative | % Breakdown | ||||
Net Investment Income | 0.0666 | 27 % | 0.5045 | 46 % | ||||
Net Realized Short- Term Capital Gains | 0.0000 | 0 % | 0.0000 | 0 % | ||||
Net Realized Long- Term Capital Gains | 0.0160 | 6 % | 0.0000 | 0 % | ||||
Return of Capital or Other Capital Source | 0.1674 | 67 % | 0.5813 |
54 % | ||||
Total per common share | 0.2500 | 100 % | 1.0858 | 100 % | ||||
Average annual total return (in relation to NAV) for the 5 years ended on November 30, 2023 | 4.30 % | |||||||
Annualized current distribution rate expressed as a percentage of NAV as of November 30, 2023 | 8.70 % | |||||||
Cumulative total return (in relation to NAV) for the fiscal year through November 30, 2023 | 5.77 % | |||||||
Cumulative fiscal year-to-date distribution rate expressed as a percentage of NAV as of November 30, 2023 | 9.45 % | |||||||
____________________________________ | |
1 The Fund's current fiscal year began on January 1, 2023 and will end on December 31, 2023 |
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.
Wellington Management Company LLP is an independent and unaffiliated investment subadviser to John Hancock Hedged Equity & Income Fund.
A company of Manulife Investment Management, we serve investors through a unique multimanager approach, complementing our extensive in-house capabilities with an unrivaled network of specialized asset managers, backed by some of the most rigorous investment oversight in the industry. The result is a diverse lineup of time-tested investments from a premier asset manager with a heritage of financial stewardship.
Manulife Investment Management is the global brand for the global wealth and asset management segment of Manulife Financial Corporation. We draw on more than a century of financial stewardship and the full resources of our parent company to serve individuals, institutions, and retirement plan members worldwide. Headquartered in
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SOURCE John Hancock Investment Management
FAQ
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