MFS Releases Closed-End Fund Income Distribution Sources for Certain Funds

MFS Investment Management (MFS) has recently announced the distribution income sources for several of its closed-end funds, providing valuable insights into the funds' performance and income generation strategies. The funds in question are MFS Charter Income Trust (MCR), MFS Government Markets Income Trust (MGF), MFS Intermediate High-Income Fund (CIF), MFS Intermediate Income Trust (MIN), and MFS Multimarket Income Trust (MMT). This article will delve into the distribution sources, annualized current distribution rates, cumulative fiscal year distributions, and average annual total returns for these funds, offering investors a comprehensive understanding of their income generation and performance.



Distribution Sources

The distribution sources for these funds vary, with net investment income being the primary source for most funds. MCR has 100% of its current distribution from net investment income, while MGF has 55%. This indicates that these funds generate a significant portion of their income from investments. Return of capital or other capital source is another significant distribution source, with MCR having 100% of its cumulative distributions for the fiscal year to date from this source, and MGF having 45%. Net realized capital gains are not a source of distribution for any of the funds, suggesting that they are not selling assets at a profit to generate income.

Annualized Current Distribution Rates and Cumulative Fiscal Year Distributions

The annualized current distribution rates and cumulative fiscal year distributions for these funds are generally higher than their average annual total returns. This indicates that the funds are distributing a significant portion of their gains to shareholders. For example, MCR has an annualized current distribution rate of 7.97% and cumulative fiscal year distributions of 6.56%, while its average annual total return for the five years ended 8-31-2024 is 3.06%. Similarly, MGF has an annualized current distribution rate of 7.26% and cumulative fiscal year distributions of 5.98%, with an average annual total return of 0.05%. This suggests that the funds are distributing more than their average annual performance.

Impact of Return of Capital Distributions

Return of capital distributions can have a significant impact on a fund's total assets and expense ratio. When a fund distributes a portion of its assets as a return of capital, it reduces the fund's total assets, which can lead to an increase in the fund's expense ratio. Investors can manage this risk by understanding the fund's distribution policy and the composition of its distributions. Diversifying the portfolio, monitoring the fund's distribution policy, considering the fund's expense ratio, and consulting with a financial advisor can help investors make informed decisions about their investments.

Conclusion

The distribution sources, annualized current distribution rates, cumulative fiscal year distributions, and average annual total returns for MFS's closed-end funds offer valuable insights into their income generation and performance. Investors should consider these factors when choosing a fund that aligns with their income needs and risk tolerance. Additionally, understanding the impact of return of capital distributions on a fund's total assets and expense ratio is crucial for managing investment risks. By staying informed and making well-researched decisions, investors can build a diversified and resilient portfolio tailored to their financial goals.