Gabelli Global Small and Mid Cap Value Trust Declares First Quarter Distribution of $0.16 Per Share

Rhea-AI Summary

The Gabelli Global Small and Mid Cap Value Trust (GGZ) declares a $0.16 per share cash distribution payable on March 21, 2024, with quarterly distributions determined by the Board of Trustees. The Fund may pay an adjusting distribution in December based on additional income and net realized capital gains. Shareholders should be aware of tax implications and the possibility of return of capital if earnings are insufficient.

Insights

Financial Analyst

The declaration of a $0.16 per share cash distribution by The Gabelli Global Small and Mid Cap Value Trust is a tangible return to shareholders and influences investor sentiment. In evaluating the distribution's impact, it's crucial to assess the sustainability of such payouts. The Fund's approach, where the Board of Trustees determines the quarterly distribution, suggests a dynamic policy responsive to the Fund's performance and market conditions.

Investors should note the distinction between distribution rate and dividend yield. The former does not account for the Fund's total return, which is a more comprehensive measure of performance. Moreover, the possibility of an adjusting distribution in December to comply with the Internal Revenue Code indicates a potential for variability in annual income, which could affect investor tax planning.

It is also worth noting that distributions exceeding the Fund's earnings are deemed a return of capital, which impacts shareholder's cost basis rather than being taxable income. This could be attractive to investors seeking tax-efficient returns, although it also implies that the Fund is not generating enough earnings to cover distributions, potentially a red flag regarding its current income-generating capabilities.

Tax Advisor

From a taxation perspective, the nature of the distribution is significant. Shareholders need to understand that all or part of the distribution may be classified as long-term capital gain or qualified dividend income, which are taxed differently than ordinary income. The current maximum federal income tax rate for long-term capital gains is 20%, but this can vary based on the individual's tax bracket, affecting investor net returns.

The additional 3.8% Medicare surcharge on 'net investment income' for certain high-income shareholders is another critical consideration. This surcharge could marginally decrease the net income for these individuals, which is an essential factor for tax planning.

Furthermore, the Fund's notice that the current distribution is deemed 100% from paid-in capital on a book basis, while not directly relevant for tax reporting, indicates the source of the distribution. This transparency is crucial for shareholders to understand the tax implications of their investment income.

Market Research Analyst

In the context of the broader market, the Fund's distribution policy can influence its attractiveness to investors. A consistent and transparent distribution policy could make the Fund a more desirable investment vehicle, particularly for income-focused investors. However, the Board's discretion to modify the policy at any time introduces an element of uncertainty.

The Fund's ability to maintain its distribution level amidst market volatility is an indicator of its financial health and management's confidence. The mention that the distribution rate should not be considered the dividend yield or total return is a subtle reminder to investors to look beyond distributions when assessing the Fund's performance.

Finally, the statement that the distribution may be a return of capital suggests that the Fund's earnings are not solely funding the distributions. This could be a point of concern for investors looking for funds with strong earnings growth. It's essential to compare this aspect with industry norms, as it may signal the Fund's current performance relative to its peers.

RYE, N.Y., Feb. 14, 2024 (GLOBE NEWSWIRE) -- The Board of Trustees of The Gabelli Global Small and Mid Cap Value Trust (NYSE: GGZ) (the “Fund”) declared a $0.16 per share cash distribution payable on March 21, 2024 to common shareholders of record on March 14, 2024.

The Fund intends to pay a quarterly distribution of an amount determined each quarter by the Board of Trustees. In addition to the quarterly distributions, and in accordance with the minimum distribution requirements of the Internal Revenue Code for regulated investment companies, the Fund may pay an adjusting distribution in December which includes any additional income and net realized capital gains in excess of the quarterly distributions for that year.

Each quarter, the Board of Directors reviews the amount of any potential distribution from the income, realized capital gain, or capital available. The Board of Directors will continue to monitor the Fund’s distribution level, taking into consideration the Fund’s net asset value and the current financial market environment. The Fund’s distribution policy is subject to modification by the Board of Directors at any time, and there can be no guarantee that the policy will continue. The distribution rate should not be considered the dividend yield or total return on an investment in the Fund.

All or part of the distribution may be treated as long-term capital gain or qualified dividend income (or a combination of both) for individuals, each subject to the maximum federal income tax rate for long term capital gains, which is currently 20% in taxable accounts for individuals (or less depending on an individual’s tax bracket). In addition, certain U.S. shareholders who are individuals, estates or trusts and whose income exceeds certain thresholds will be required to pay a 3.8% Medicare surcharge on their “net investment income”, which includes dividends received from the Fund and capital gains from the sale or other disposition of shares of the Fund.

If the Fund does not generate sufficient earnings (dividends and interest income, less expenses, and realized net capital gain) equal to or in excess of the aggregate distributions paid by the Fund in a given year, then the amount distributed in excess of the Fund’s earnings would be deemed a return of capital. Since this would be considered a return of a portion of a shareholder’s original investment, it is generally not taxable and would be treated as a reduction in the shareholder’s cost basis.

Long-term capital gains, qualified dividend income, investment company taxable income, and return of capital, if any, will be allocated on a pro-rata basis to all distributions to common shareholders for the year. Based on the accounting records of the Fund currently available, the current distribution paid to common shareholders in 2024 would be deemed 100% from paid-in capital on a book basis. This does not represent information for tax reporting purposes. The estimated components of each distribution are updated and provided to shareholders of record in a notice accompanying the distribution and are available on our website (www.gabelli.com). The final determination of the sources of all distributions in 2024 will be made after year end and can vary from the quarterly estimates. Shareholders should not draw any conclusions about the Fund’s investment performance from the amount of the current distribution. All individual shareholders with taxable accounts will receive written notification regarding the components and tax treatment for all 2024 distributions in early 2025 via Form 1099-DIV.

Investors should carefully consider the investment objectives, risks, charges, and expenses of the Fund before investing. For more information regarding the Fund’s distribution policy and other information about the Fund, call:

Bethany Uhlein
(914) 921-5546

About The Gabelli Global Small and Mid Cap Value Trust
The Gabelli Global Small and Mid Cap Value Trust is a diversified, closed-end management investment company with $131 million in total net assets whose primary investment objective is to achieve long-term capital growth of capital. Under normal market conditions, the Fund will invest at least 80% of its total assets in equity securities (such as common stock and preferred stock) of companies with small or medium sized market capitalizations. The Fund is managed by Gabelli Funds, LLC, a subsidiary of GAMCO Investors, Inc. (OTCQX: GAMI).

NYSE – GGZ
CUSIP – 36249W104

Investor Relations Contact:
Bethany Uhlein
(914) 921-5546
buhlein@gabelli.com

FAQ

When is the cash distribution declared by The Gabelli Global Small and Mid Cap Value Trust (GGZ) payable?

The cash distribution declared by GGZ is payable on March 21, 2024.

How are the quarterly distributions determined by The Gabelli Global Small and Mid Cap Value Trust (GGZ)?

The quarterly distributions by GGZ are determined by the Board of Trustees each quarter.

What tax implications should shareholders of The Gabelli Global Small and Mid Cap Value Trust (GGZ) be aware of?

Shareholders should be aware of potential tax implications, including the 3.8% Medicare surcharge on 'net investment income' for certain U.S. shareholders.

What happens if The Gabelli Global Small and Mid Cap Value Trust (GGZ) does not generate sufficient earnings?

If GGZ does not generate sufficient earnings, the amount distributed in excess of earnings would be considered a return of capital, generally not taxable.

Where can shareholders find updated information on the components of distributions by The Gabelli Global Small and Mid Cap Value Trust (GGZ)?

Shareholders can find updated information on the components of distributions on GGZ's website (www.gabelli.com).