Dividends And Capital Gain Distributions Information & FAQs

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• Dividends and Capital Gain Distributions Information & FAQs

Dividends and Capital Gain Distributions Information & FAQs

Required tax forms are mailed according to IRS requirements.

Required Tax Form Mail Dates

Form	Required Mailing Date
1099-Q, 1099-R, & State of CA 592-B	02/02/2026
1099-B, 1099-DIV, 1099-INT	02/17/2026
1042-S	03/16/2026
5498-ESA	04/30/2026
5498	06/01/2026

Income dividends may be paid quarterly or annually. Capital gains (if required) are generally distributed in December. The amount of dividend and capital gain distributions will be reported on year-end account statements (mailed in January) and on Form 1099-DIV (mailed by February 17th). Other required tax form mail dates. When dividends and distributions are paid, the share price of the fund declines by the amount of the per share distribution to shareholders. The charts and pricing on various internet sites do not adjust for these distributions. As a result, price declines will generally be misrepresented as an absolute decline on the charts even though there has been no change in the total return of the fund. This is not unique to mutual funds; the same discrepancy can happen with common stocks.

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A list of FAQs on mutual fund distributions is listed below. Please contact us with additional questions.

Mutual Fund Dividend and Distributions Frequently Asked Questions

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• What is a mutual fund dividend?
• What is a mutual fund distribution (i.e.; capital gain)?
• Why do mutual funds pay dividends and distributions?
• What are the different types of capital gains distributions made from a mutual fund?
• What are the tax implications of distributions to shareholders?
• How does a mutual fund generate income and capital gains to be distributed?
• Do fund managers try to limit capital gain distributions?
• For tax purposes, what will be reported on my 1099-DIV?
• Is a fund's share price affected when a distribution is paid?
• Does a fund's distribution affect its total return?
• How is a mutual fund affected if there is no required distribution?
• Who is responsible for paying taxes on these distributions?
• How is distribution eligibility determined?

What is a mutual fund dividend?

A mutual fund dividend is income from dividends and interest earned by a mutual fund’s holdings. Dividends that a fund earns must be paid to shareholders at least once per year.

Return to TopWhat is a mutual fund distribution (i.e.; capital gain)?

A mutual fund distribution is derived from net capital gains realized from the sale of a fund's investments and income from dividends and interest earned by a fund's holdings less the fund's operating expenses.

Return to TopWhy do mutual funds pay dividends and distributions?

Tax law requires that mutual funds pay substantially all net investment income and net capital gains to their investors, who may elect to receive cash or reinvest in additional shares of the fund.

Return to TopWhat are the different types of capital gains distributions made from a mutual fund?

A fund has realized net capital gains when realized gains on the sale of its portfolio assets exceed realized losses. A mutual fund generally does not pay taxes on realized net capital gains, but instead distributes these gains to shareholders who then include them on their individual income tax returns. These gains are classified as long or short-term gains and are taxed differently. A gain on the sale of an investment owned for one year or less is considered short-term for federal income tax purposes and is taxed as ordinary income. A gain on the sale of an investment owned for more than one year is considered long term for federal income tax purposes.

Return to TopWhat are the tax implications of distributions to shareholders?

Shareholders -- except those in tax-sheltered accounts such as Individual Retirement and 401(k) and 403(b) accounts -- are required to pay taxes on distributions, whether the distributions are paid out in cash or reinvested in additional shares. Long-term capital gain distributions are taxed at long-term capital gains tax rates; distributions from short-term capital gains and net investment income (interest and dividends) are taxed as dividends at ordinary income tax rates. Ordinary income tax rates generally are higher than long-term capital gains tax rates.

Return to TopHow does a mutual fund generate income and capital gains to be distributed?

A mutual fund generates capital gains and income for shareholders in two ways -- by selling investments that have increased in value and by earning dividends and interest on its investments.

Return to TopDo fund managers try to limit capital gain distributions?

Our basic buy and hold philosophy helps limit the amount of gains realized in any period. However, while taxes are an important consideration, securities will be sold when it is appropriate for investment reasons.

Return to TopFor tax purposes, what will be reported on my 1099-DIV?

For tax purposes, you may see on your 1099-DIV the following items: Long-term capital gain distributions, which are the net long-term gains realized from the sale of securities. Capital gain distributions come from long-term gains resulting from the sale of securities held for more than one year and are taxed at long-term capital gains tax rates.

Ordinary dividends, which are derived from (1) dividends or interest the fund earns on its investments and (2) net realized short-term gains from selling securities held one year or less. These are taxed at ordinary income rates. (NOTE: Unrealized gains on investments that have increased in value but have not yet been sold are reflected daily as part of a fund's net asset value.)

Return to TopIs a fund's share price affected when a distribution is paid?

Yes. Capital gains and dividend distributions will reduce the fund's net asset value per share (NAV) by the amount of the distribution on the ex-dividend date. For example, if a mutual fund were to pay a distribution of $1.00 per share and the fund's net asset value (NAV) was $10.00 per share prior to the distribution, on the ex-dividend date the NAV would be reduced by $1.00 per share. Market activity may also impact the fund's NAV on the ex-dividend date, so the total change in a fund's NAV may be more or less than the dividend.

Return to TopDoes a fund's distribution affect its total return?

No. Distributions do not impact total return. Although the NAV drops when the distribution is paid, shareholders who reinvest their distributions also receive more shares.

Return to TopHow is a mutual fund affected if there is no required distribution?

There are no tax consequences to shareholders or to the fund if a distribution is not required. The fund's net asset value and its investment performance would remain the same. Shareholders will not be required to pay taxes if the fund has not made a taxable distribution.

Return to TopWho is responsible for paying taxes on these distributions?

Shareholders are responsible for paying taxes on distributions they receive each year, whether they receive the distributions in cash or reinvest them in additional shares of the fund. The funds report distributions to shareholders on IRS Form 1099-DIV at the end of each calendar year. Certain types of fund accounts, such as Individual Retirement and 401(k) accounts, are tax-advantaged. Therefore, shareholders who own these types of accounts pay taxes, if any, on fund distributions only when money is withdrawn from the account and will receive different IRS reports.

Return to TopHow is distribution eligibility determined?

The dates explained below determine the timing of dividends and distributions and the customers who are eligible to receive them: Record Date: All shareholders of record at close of business on this day are eligible to receive the payment. Ex-Dividend Date: The date on which the per share amount is deducted from the fund's net asset value per share. The ex-dividend date is generally the business day after the record date. Payment Date: The fund pays customers their proportional shares on this date. For the Nicholas Funds, the payment date is normally the same business as the ex-dividend date, except for those funds with daily income distributions.

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When are required tax forms mailed?

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Please refer to each prospectus for important information about each investment company, including investment objectives, risks, charges and expenses.

Mutual fund investing involves risk; principal loss is possible. Small- and medium-capitalization companies tend to have limited liquidity and greater price volatility than large-capitalization companies. Investments in debt securities typically decrease in value when interest rates rise. This risk is usually greater for longer-term debt securities. Investment by the Funds in lower-rated and non-rated securities presents a greater risk of loss to principal and interest than higher-rated securities.

Past performance does not guarantee future results.

Diversification does not assure a profit nor protect against loss in a declining market.

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