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Open-end fund (LOF), full name is "Listed Open-Ended Fund". Is a listed open-end funds issue, investors can either purchase a specified network and the redemption of Fund shares can also be traded on an exchange of the Fund. But if the designated outlets investors purchase shares in the fund, you want to throw the Internet, need to go through some custody transfer procedures; Similarly, if the exchange line to buy shares in the fund, you want to redeem at a specified network, but also the custody transfer to go through certain formalities.
Understanding closed-end funds John Hancock closed-end funds Closed-end funds Q&A Q. What is a closed-end fund? A. A closed-end fund is an investment company that issues a fixed number of shares through an initial public offering (IPO). The combined assets are professionally managed and contain a portfolio of securities. After the IPO, closed-end fund shares trade in the secondary market, either on an exchange or on the over-the-counter market, much like shares of a stock. The trading price of the fund’s shares is determined by its market price, not by the fund’s net asset value (NAV). Q. What is the difference between a closed-end fund and an open-end fund? A. Open-end funds continuously sell and redeem shares for investors. Closed-end funds sell a fixed number of shares once, in an IPO. Closed-end fund shares cannot be redeemed directly, and can only be sold in a secondary market, typically the Nasdaq or NYSE. Open-end fund share prices are determined by the fund’s NAV and are calculated at the end of each business day. Closed-end fund share prices fluctuate throughout the day, as they are driven by market price, which is determined by supply and demand on a stock exchange. Q. What is the difference between a closed-end fund and an open-end fund that is closed? A. Closed-end funds initially issue a fixed number of shares, which are then bought and sold in the secondary marketplace. Closed funds are open-end funds that no longer allow new investors into the fund. This often happens when assets become too large to manage. Q. What is the difference between net asset value (NAV) and market price? A. Per share NAV is the current value of all the fund’s assets (less liabilities), divided by the total number of shares outstanding. Market price is the price an investor pays or receives when they purchase or sell shares of a closed-end fund. Again, this price is determined by supply and demand for the closed-end fund on a stock exchange. Q. What causes the market price of a closed-end fund to increase or decrease? A. The market price of a closed-end fund may fluctuate based on supply and demand in the marketplace. There are many factors that determine the market price, including overall market perception of the fund’s underlying securities, market activity in specific regions or sectors in which the fund invests, interest rate moves, world news and events, tax legislation, news or issues relating to portfolio management, fund performance, net asset value and dividend and capital gain distributions. Long-term benefits Q. How can an investor purchase or sell closed-end fund shares? A. Investors can purchase or sell closed-end fund shares in the secondary market, either on an exchange or on the over-the- counter market, like those of any individual stock. Investors are typically required to pay a brokerage fee for the purchase and sale of closed-end fund shares, much like those of a stock. Q. What is investment leverage? A. Investment leverage is borrowing assets to purchase additional securities. The expectation is that the borrowing costs will be lower than the earnings generated from the additional securities purchased with the leverage proceeds. This technique creates an opportunity for closed-end funds to generate additional income to common shareholders with the potential for greater yields and total return. Generating extra income can be achieved as long as the fund earns rates that are greater than the rate it is required to pay out. One form of investment leverage involves the issuance of preferred shares. The fund takes the proceeds from the issuance and invests in higher-yielding, dividend-paying securities as compared with the lower dividend payments it is required to pay its preferred shareholders. If the performance of the capital contributed by the preferred shares fails to cover its respective dividends, the value of the common shares may decrease and dividends on the common shares could be reduced. Q. What does it mean when a fund trades at a discount or premium? A. A premium occurs when the market price of a closed-end fund share is more than its NAV. Conversely, a discount occurs when the market price of a closed-end fund share is less than its NAV. Since investors receive capital gains and dividend distributions on a per share basis, purchasing closed-end fund shares at a discount presents a unique opportunity for investors to receive a higher yield on their investment. Investors also benefit from buying shares at a discount when purchasing a set number of shares, because their cost is lower. In addition, when investors have a set dollar amount to invest, they get more shares when they buy at a discount. Key characteristics With so many investment choices in the market today, closed-end funds offer investors a unique investing opportunity unlike any other investment vehicle. The chart below compares the characteristics of closed-end funds with those of open-end mutual funds. There is no disputing that open-end funds have their own merits; however, closed-end funds offer investors the option to further diversify with a product unlike any other. Discount benefits Higher yields based on distributions Share Price Dividend Yield NAV of $10 $1.00 12.5% Investor A (with discount) 20% discount = $8 per share Investor B (without discount) $10 per share $1.00 10.0% Maximized purchasing power Share Price Total cost of $1,000 shares Cost benefit NAV of $10 $8,000 $2,000 Investor A (with discount) 20% discount = $8 per share Investor B (without discount) $10 per share $10,000 Greater earning potential by obtaining additional shares Share Price Shares purchased with $10,000 Additional shares NAV of $10 $1,250 250 Investor A (with discount) 20% discount = $8 per share Investor B (without discount) $10 per share $1,000 Closed-End Fund Open-End Fund Asset base ■■ No redemption issues in a bear market ■■ Potentially high redemption levels in a bear market ■■ Ability to be fully invested with little or no cash positions ■■ Inability to invest in a large quantity of risky, less liquid securities due to cash maintenance requirements ■■ Ability to invest in riskier, less liquid securities for potentially higher returns Liquidity ■■ Orders are placed throughout the day at market price ■■ Orders placed at end-of-day NAV ■■ Purchase price is available at time of purchase ■■ Must wait for daily closing price for purchase price ■■ Investor must buy and sell in the secondary market at ■■ Investor can always redeem at NAV, less sales charge market price, less commissions Opportunity to invest at ■■ Opportunity to buy shares at a discount to NAV, plus ■■ Shares are purchased at NAV with no discount, plus “bargain” prices applicable commissions applicable sales charge ■■ Discount can potentially yield higher returns Leverage potential ■■ With a stable pool of assets, it is easier for closed- ■■ Open-end funds have the ability to leverage, but with end funds to leverage that asset base and invest the fluctuating assets, it can be more difficult to borrow proceeds in potentially higher-yielding securities additional money No purchase requirements ■■ No initial or subsequent investment requirement ■■ Low initial and subsequent investment requirement Ticker Inception Distribution Listed John Hancock Closed-End Funds CUSIP symbol year schedule exchange Bank and Thrift Opportunity Fund BTO 409735107 1994 Quarterly NYSE Income Securities Trust JHS 410123103 1973 Quarterly NYSE Investors Trust JHI 410142103 1971 Quarterly NYSE Patriot Premium Dividend Fund II PDT 41013T105 1989 Monthly NYSE Preferred Income Fund HPI 41013W108 2002 Monthly NYSE Preferred Income Fund II HPF 41013X106 2002 Monthly NYSE Preferred Income Fund III HPS 41021P103 2003 Monthly NYSE Tax-Advantaged Dividend Income Fund HTD 41013V100 2004 Monthly NYSE Tax-Advantaged Global Shareholder Yield HTY 41013P749 2007 Quarterly NYSE Why John hAnCoCk Funds? For more than three decades, A name you know and trust John Hancock Funds has been When you invest with John Hancock Funds, you are investing with one of the most recognized and respected names in the financial helping individual, corporate services industry. Our parent company has been helping individuals and institutional clients reach and institutions increase and protect wealth since 1862. their most important financial Solutions across the investing spectrum goals. With so many fund We offer equity, income, international and sector investment solutions companies to choose from, managed by leading institutional money managers. We take a disciplined, why should you invest with us? team approach to portfolio management and research, leveraging the expertise of seasoned investment professionals. Committed to you Our shareholders come first. We work hard to provide you with the products you may need to build a solid financial foundation. We believe in the value of advice and partner with financial professionals in a commitment to help you reach your long-term investing goals. If you are interested in investing in any of the John Hancock closed-end funds, please contact your financial professional. For current fund information, including daily NAVs and market prices, or to request closed-end fund literature, call 1-800-843-0090 or visit our Web site at www.jhfunds.com. Closed-end fund shares are not redeemable, but instead are traded in the secondary market and frequently trade at a discount to net asset value. Specialized funds may carry additional risks. NOT FDIC INSUrED. MAY LOSE VALUE. NO BANK gUArANTEE. NOT INSUrED BY ANY gOVErNMENT AgENCY. John Hancock Funds, LLC MEMBEr FINrA 601 Congress Street n Boston, MA 02210-2805 1-800-225-6020 n www.jhfunds.com rMS33 11/07
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