Gladstone Investment Corporation (Nasdaq: GAIN) (the “Company”)
announced today that its board of directors (the “Board of
Directors”) declared the following monthly cash distributions to
preferred and common stockholders.
The Company will also pay a supplemental
distribution of $0.09 per share to holders of its common stock in
June 2020. In this regard, the Company currently anticipates paying
semi-annual, supplemental distributions each fiscal year that
include undistributed net capital gains, but may also be made from
undistributed net investment income, which the Company anticipates
it will continue to generate in the future. The Board of Directors
will evaluate the amount and timing of additional, semi-annual,
supplemental distributions in future periods.
The Company also announced a deemed distribution
to common stockholders of record as of March 31, 2020.
Common Stock: $0.07 per share
of common stock for each of April, May, and June 2020, and a
supplemental distribution of $0.09 per share of common stock in
June 2020, all payable per the table below.
Record Date |
Payment Date |
Cash Distribution |
April 24 |
April 30 |
$0.07 |
May 19 |
May 29 |
$0.07 |
June 8 |
June 17 |
$0.09* |
June 19 |
June 30 |
$0.07 |
Total for the Quarter: |
$0.30 |
|
|
*Denotes supplemental distribution to common
stockholders
Series D Term Preferred Stock:
$0.13020833 per share of the Company’s 6.25% Series D Cumulative
Term Preferred Stock (“Series D Term Preferred Stock”) for each of
April, May, and June 2020, payable per the table below. The Series
D Term Preferred Stock trades on the Nasdaq under the symbol
“GAINM.”
Record Date |
Payment Date |
Cash Distribution |
April 24 |
April 30 |
$0.13020833 |
May 19 |
May 29 |
$0.13020833 |
June 19 |
June 30 |
$0.13020833 |
Total for the Quarter: |
$0.39062499 |
|
|
Series E Term Preferred Stock:
$0.1328125 per share of the Company’s 6.375% Series E Cumulative
Term Preferred Stock (“Series E Term Preferred Stock”) for each of
April, May, and June 2020, payable per the table below. The Series
E Term Preferred Stock trades on the Nasdaq under the symbol
“GAINL.”
Record Date |
Payment Date |
Cash Distribution |
April 24 |
April 30 |
$0.1328125 |
May 19 |
May 29 |
$0.1328125 |
June 19 |
June 30 |
$0.1328125 |
Total for the Quarter: |
$0.3984375 |
|
|
Deemed Distribution (Common
Stock): The Company also announced a deemed distribution
of $1.15 per share attributable to common stockholders of record as
of the close of business on March 31, 2020. Similar to the prior
year, we have provided a number of questions and answers below
regarding deemed distributions generally.
Frequently Asked Questions (Applicable to Common
Stockholders of Record on March 31, 2020)
What is a deemed
distribution?
For U.S. federal income tax purposes, we have
elected to be treated as a regulated investment company (“RIC”)
under Subchapter M of the Internal Revenue Code of 1986, as amended
(the “Code”). To continue to qualify as a RIC for U.S. federal
income tax purposes and obtain favorable RIC tax treatment, we must
meet certain requirements, including certain minimum distribution
requirements. Subchapter M provides the Company with two choices
regarding distributing its net long-term capital gains: (i) it can
retain them and declare a deemed distribution or (ii) it can pay
out the gains as a cash distribution to its stockholders.
The Company has declared a deemed distribution
of $1.15 per share to the Company’s common stockholders of record
as of the close of business on March 31, 2020. When the Company
declares a deemed distribution, instead of a cash distribution, the
Company pays a 21% federal income tax on the retained net long-term
capital gains on behalf of common stockholders. In turn, common
stockholders are deemed to have received a capital gain dividend
and are deemed to have paid the tax that is actually paid by the
Company. As a result, common stockholders receive a tax credit that
they can use to offset their tax on the deemed distribution or for
other purposes, including claiming a refund, as appropriate. Common
stockholders also increase their adjusted tax basis in their shares
of the Company by the amount of the deemed distribution, net of
U.S. federal income taxes paid by the Company and deemed paid by
the stockholder. The tax effect is the same as if the capital gains
had been distributed to the Company’s common stockholders in cash,
who then elected to reinvest their proceeds, net of the tax paid by
the Company (i.e., 79% of the amount received after the 21% tax is
applied).
Why did the Company choose to declare a
deemed distribution rather that a cash dividend at this
time?
The Board of Directors, after careful review and
deliberation, determined that it is in the best interest of the
Company and its continued growth to declare a deemed distribution.
The retained capital will enable the Company to take advantage of
future investment opportunities and allow the Company’s net asset
value to continue to grow in an efficient manner.
What are the relevant distribution dates
for the deemed distribution?
As there is no cash being paid out, there is no
payment date for the deemed distribution. However, the deemed
distribution of $1.15 per share and corresponding tax credit are
attributable to common stockholders of record on March 31,
2020.
Who will send me the tax information of
the deemed distribution and when will I get this
information?
The deemed distribution is deemed paid to the
stockholders of record as of March 31, 2020. All relevant tax
information will be included in Internal Revenue Service (“IRS”)
Form 2439 (Notice to Shareholder of Undistributed Long-Term Capital
Gains), to be mailed in May 2020 to holders of record.
If you own your shares in “street name,” your
brokerage firm or bank will send you the relevant tax information.
If you own your shares directly in your name, Computershare, Inc.,
the Company’s transfer agent, will send you the tax information. If
you have not received the information by mid-June 2020, you should
contact your brokerage firm’s or bank’s tax department and request
that information.
Please note, the Form 2439 will be mailed to the
address of record on the account. Therefore, if you hold your
shares in a typical taxable account (e.g., a joint account, an
individual account), your brokerage firm will mail the Form 2439 to
the address of record (e.g., your home address). If you hold your
shares in a tax-deferred account, such as a retirement account
(e.g., an IRA or Roth IRA), the Form 2439 for that account will
likely not be mailed to you; rather, it will be delivered
internally to the brokerage firm’s custodian for retirement
accounts. For such accounts, your brokerage firm/custodian will
file an IRS Form 990-T on your behalf. The purpose of the IRS Form
990-T is explained below.
What are the tax consequences of the
deemed distribution to me as a stockholder?
The following simplified example generally
illustrates the tax treatment under Subchapter M of the Code for
the Company and its common stockholders of record on March 31, 2020
with regard to the $1.15 per share net long-term capital gain to be
retained by the Company and designated as a deemed
distribution:
1. |
The Company will pay U.S. federal income tax of 21% on the
undistributed net long-term capital gain on behalf of common
stockholders. |
|
|
2. |
All stockholders will receive a U.S. federal income tax credit
equal to their allocable share of the 21% U.S. federal income tax
paid by the Company on the undistributed capital gain. Generally,
this credit will be applicable for the 2020 taxable year for
stockholders that are individuals or otherwise have a calendar-year
taxable year.
- Stockholders that are subject to
U.S. federal income taxation generally can use that credit to
offset their U.S. federal tax liabilities for the stockholder’s
taxable year in which the last day of the Company's taxable year
falls (generally, the 2020 taxable year for stockholders that are
individuals or otherwise have a calendar-year taxable year) and can
claim a refund on their U.S. federal income tax return (for example
on Form 1040) to the extent of any unused credit.
- Stockholders who hold their shares
in tax-deferred/retirement accounts should not receive a Form 2439
directly, because the Form 2439 will be delivered internally to the
brokerage firm’s custodian for retirement accounts. The brokerage
firm/custodian will then use the Form 2439 information to file an
IRS Form 990-T on behalf of such stockholders, which will allow
such stockholders to receive a tax refund from the IRS for the
taxes the Company paid on their behalf. Depending on your brokerage
firm/custodian, this process may occur automatically, but the
Company recommends that stockholders contact their brokerage
firm’s/custodian’s internal tax departments to ensure this process
is taking place. It typically takes several months to a year for
brokerage firms/custodians to receive the refund and deposit it
into stockholders’ tax-deferred/retirement accounts.
- Other tax-exempt stockholders can
also receive refunds of the taxes paid on their behalf on the
deemed distribution by filing IRS Form 990-T.
- Stockholders that are not U.S. tax
residents should consult their own tax advisors as to the effect of
the deemed distribution and the taxes paid on their behalf in their
individual circumstances.
|
3. |
Common stockholders will increase the adjusted tax basis in their
stock by the deemed distribution of $1.15 per share, net of taxes
paid on their behalf. |
Stockholders requiring further information about
the impact of the deemed distribution on their state and/or local
taxes should consult their tax advisors. The Company does not
provide tax advice to its stockholders.
If I have questions about my individual
tax situation, where can I get them answered?
The Company does not provide tax advice to its
stockholders. Please consult your personal tax advisor. We are
providing these questions and answers solely as a convenience to
our stockholders.
The Company offers a dividend reinvestment plan
(the “DRIP”) to its common stockholders. For more information
regarding the DRIP, please visit www.gladstoneinvestment.com.
About Gladstone Investment
Corporation: Gladstone Investment Corporation is a
publicly traded business development company that seeks to make
secured debt and equity investments in lower middle market
businesses in the United States in connection with acquisitions,
changes in control, and recapitalizations. Information on the
business activities of all the Gladstone funds can be found at
http://www.gladstonecompanies.com/.
Source: Gladstone Investment Corporation
Investor Relations Inquiries:
Please visit www.gladstone.com or +1-703-287-5893.
Forward-looking Statements: The
statements in this press release regarding potential future
distributions, earnings and operations of the Company are
"forward-looking statements." These forward-looking statements
inherently involve certain risks and uncertainties in predicting
future results and conditions. Although these statements are based
on the Company's current plans that are believed to be
reasonable as of the date of this press release, a number of
factors could cause actual results and conditions to differ
materially from these forward-looking statements, including those
factors described from time to time in the
Company's filings with the Securities and Exchange
Commission. The Company undertakes no obligation to
publicly release the result of any revisions to these
forward-looking statements that may be made to reflect any future
events or otherwise, except as required by law.
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