Dictionary of Finance and Investment Terms: purchase fund
purchase fund
provision in some preferred stock contracts and bond indentures requiring the issuer to use its best efforts to purchase a specified number of shares or bonds annually at a price not to exceed par value. Unlike sinking fund provisions, which require that a certain number of bonds be retired annually, purchase funds require only that a tender offer be made; if no securities are tendered, none are retired. Purchase fund issues benefit the investor in a period of rising rates when the redemption price is higher than the market price and the proceeds can be put to work at a higher return.
