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Unlike a typical mutual fund, closed-end funds do not generate subscription or redemption shares as a result of investor related activity. Instead, to raise capital or generate cash, the funds issue preferred series of shares to investors that act as a short term loans. These shares pay dividends based on a fixed or variable rate in the form of distributions to the share holder shareholder at periodic intervals. Preferred series owners are entitled to payment on their investment in advance of common shareholders.
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