What are the differences between being paid out short-tem or long-term dividends (closed-end fund)?

I mostly invest in stocks, but when I was new to the market I bought an closed-end fund (symbol: IIF). Recently I saw this article:
http://biz.yahoo.com/bw/070619/200706190...

What does this mean for me? I can think of a couple of ways of interpreting it.
- It could mean that the fund had short-term capital gains of $0.10 per share and long-term capital gains of $4.80 a share, which to me means that I will receive $4.90 a share.
- It could also mean that the shares I hold are somehow ear-marked as short-term or long-term

Also, it seems that every time the fund the declares is a distribution (dividend), the price drops 10%... what's going on here... my only guess is that they are selling positions to pay the dividend, thus the net holdings are less, affecting what people are willing to pay for it.

I have searched the Internet for a while looking for some insight into this, but I always get the basic "What percentage are long-term, short-term capital gains taxed at"?

"What are the differences between being paid out short-tem or long-term dividends." No such thing as short- or long-term dividends, they are capital gains.
"...fund the declares is a distribution (dividend),..." not all of the distribution is dividends, it could be dividends and capital gains.
"It could also mean that the shares I hold are somehow ear-marked as short-term or long-term" Nope, you shares neither short-term nor long term. Now if you sell you shares one year or less after you bought them, you profit (capital gains) are short-term. If you sell one year and one day or longer after you buy them, then your profit (capital gains) are long term. Shares are shares.
Their distribution of 10 cents short term capital gains and $4.80 long term cg means they sold some of the stocks they hold in the fund and have a profit of 10 cents on stocks held 1 year or less and $4.80 profit on stocks held over 1 year. You receive a check for $4.90 a share.
The price can drop when the fund makes a distribution. They are not selling positions to pay the dividend -- they collect dividends from stocks they own, and keep the dividend as cash on hand to pay for the dividend at the end of the quarter, 1/2 year or end of the year. The net holdings are stocks they still own plus cash on hand (from dividends and capital gains) so when they give you the dividends/capital gains, the net asset value of the fund does go down and the price may (or not) also, depending what "the market" figures the fund is now worth.

dividends cost the fund money so the shares are worth less after dividends are paid. The fund will sell positions during the year some they have held long term and some they have held short term, even if you just bought it you can have long term gains.