Dual Fund Law and Legal Definition

Dual fund is a mutual fund organized as a closed-end investment company with a limited number of shares available for purchase. It distinguishes between common shareholders and preferred shareholders for distribution purposes. Thus, there will be two funds in one. Half of the fund's shares are sold as capital shares to investors interested in capital gains and the other half are sold as income shares. Common shareholders receive all distributions from capital gains, while preferred shareholders receive all distributions from dividend and interest income.

Dual fund will have a time specified for liquidation in its organizational documents. Income is distributed annually but the capital gains are not distributed until the fund is liquidated. The income shares are retired at a fixed price and the capital growth is distributed to the growth shareholders.