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Finance Dictionary and Glossary of Investment Terms
dual-purpose fund
Definition 1.
A closed-end fund which distinguishes between common shareholders and preferred shareholders for distribution purposes. Common shareholders receive all distributions from capital gains, while preferred shareholders receive all distributions from dividend and interest income. The class of shares sold to common shareholders is called capital shares, and this group of shareholders generally has a less stable payment stream. The class of shares sold to preferred shareholders is called income shares, and their income stream is relatively more stable. When a dual-purpose fund is set up, a liquidation date is specified. On the liquidation date, preferred shareholders have the first right to payouts from the fund, but they can only be paid up to the par value of their shares. Common shareholders have rights to all the remaining capital from the fund.
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