Western Asset Inflation-Linked Income Fund (WIA or “the Fund”; CUSIP: 95766Q106) Announces Notification of Sources of Distributions
- Consistent monthly distribution for December 2023
- 100% net investment income allocation for the fiscal year 2023
- No negative aspects identified in the PR
Insights
The distribution announcement by Western Asset Inflation-Linked Income Fund (WIA) indicates a payout derived solely from net investment income, with no capital gains or return of capital components. This suggests that the fund's investments have generated sufficient income to cover distributions, which is a positive signal for the fund's current income-generating capabilities.
For stakeholders, the absence of capital gains distributions could imply that the fund is focused on income rather than capital appreciation. This may attract investors seeking stable income, particularly in an inflationary environment where such assets can offer some protection against eroding purchasing power.
However, the lack of capital gains could also suggest limited portfolio turnover or appreciation, which might be a concern for those seeking growth in addition to income. Investors should also consider the tax implications of the distribution composition, as income is taxed differently than capital gains.
From a taxation perspective, the nature of the distributions from WIA is significant. Distributions categorized as net investment income are generally taxed at the individual's ordinary income tax rate, rather than the typically lower long-term capital gains rate.
This has implications for the after-tax return for investors, particularly those in higher tax brackets. It is crucial for investors to understand the tax characteristics of their investments to make informed decisions that align with their tax planning strategies.
Furthermore, the lack of return-of-capital distributions means that shareholders' cost basis in the fund will not be reduced for these distributions, which can affect the calculation of capital gains or losses upon the sale of shares.
Examining the fund's distribution composition in the context of broader market trends, it's noteworthy that WIA has maintained a distribution solely from net investment income. In an economic landscape where inflation concerns are prevalent, the fund's strategy might be aligned with a defensive posture, prioritizing income stability over riskier growth strategies.
Comparing WIA's distribution approach to peers in the same category can provide insights into the fund's competitive position. If most funds in this space are also focusing on income, WIA's strategy may be aligned with industry norms. However, if competitors are realizing significant capital gains, it could indicate that WIA's strategy is conservative or that it may be underperforming in terms of capital appreciation.
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 December 29, 2023, and for the fiscal year 2023 year-to-date are as follows:
Estimated Allocations for the December Monthly Distribution as of November 30, 2023:
Distribution Per Share |
Net Investment Income |
Net Realized Short-Term Capital Gains |
Net Realized Long-Term Capital Gains |
Return of Capital |
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Cumulative Estimated Allocations fiscal year-to-date as of November 30, 2023, for the fiscal year ending November 30, 2023:
Distribution Per Share |
Net Investment Income |
Net Realized Short-Term Capital Gains |
Net Realized Long-Term Capital Gains |
Return of Capital |
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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. WIA estimates that it has distributed more than its income and net realized capital gains; therefore, a portion of the WIA 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 WIA’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 11/30/2023)1 |
Annualized Distribution Rate (as a percentage of NAV as of 11/30/2023)2 |
Cumulative Total Return (in relation to the change in NAV for the fiscal period through 11/30/2023)3 |
Cumulative Fiscal Year-To-Date Distribution Rate (as a percentage of NAV as of 11/30/2023)4 |
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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 November 30, 2023. 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 as of November 30, 2023.
- Cumulative Total Return is the percentage change in the Fund’s NAV from November 30, 2022 through November 30, 2023, assuming reinvestment of distributions paid.
- The Cumulative Fiscal Year-To-Date Distribution Rate is the dollar value of distributions for the fiscal period November 30, 2022 through November 30, 2023, as a percentage of the Fund’s NAV as of November 30, 2023.
This Fund has a managed distribution policy that seeks to deliver the Fund’s long-term total return potential through regular monthly distributions declared at a fixed rate per common share. Distributions may be paid in part or in full from net investment income, realized capital gains and by returning capital, or a combination thereof. Shareholders should note, however, that if a Fund’s aggregate net investment income and net realized capital gains are less than the amount of the distribution level, the difference will be distributed from the Fund’s assets and will constitute a return of the shareholder’s capital. A return of capital is not taxable; rather it reduces a shareholder’s tax basis in his or her shares of the Fund. The Board of Directors of the Fund may terminate or suspend the managed distribution policy at any time, which could have an adverse effect on the market price of the Fund’s shares.
For further information on Western Asset Inflation-Linked Income Fund, please visit our web site at: www.franklintempleton.com/investments/options/closed-end-funds
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.
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/20231229731335/en/
Investor Contact: Fund Investor Services 1-888-777-0102
Source: Franklin Resources, Inc. and Legg Mason Closed End Funds
FAQ
What is the Western Asset Inflation-Linked Income Fund's (WIA) estimated distribution for December 2023?
What are the sources of the distribution for the fiscal year 2023 for WIA?
Is there any negative impact on WIA's distribution as per the PR?
What is the cumulative estimated allocation for fiscal year-to-date as of November 30, 2023, for WIA?
Should shareholders draw any conclusions from the PR?
