Investor Information
We don’t want anyone to be unhappy with their investment in our funds. In an effort to achieve this, we want to give you as much information as we can so that you can make an informed decision about whether or not buy or to continue to own our funds. If you have realistic expectations, there is less chance of your being disappointed. Below we have identified a number of issues that potential investors should consider prior to investing in the Boulder Funds (the "Funds"). Most of the comments and insights below apply equally to all investment funds, both closed- and open-end; but we especially want you to consider and focus on these issues when you are making your investment decisions about the Boulder Funds. 1. Net Asset Value. Net asset value or NAV is the market's valuation of the Fund's underlying assets as of a particular date net of liabilities. Since the market's valuation, and thus the Fund's NAV, changes by the minute, you should take a hard look at the Fund's most recent NAV, especially in relation to its market price. There may have been substantial changes since you started your research or made your decision to invest. The NAV for the Funds is posted on this website every Friday. 2. Portfolio Makeup. You should take a hard look at the Fund's underlying assets (our portfolio of investments) to see if our investments are in the kinds of companies in which you want to have an indirect interest. In addition, you should form an opinion in a general way as to whether the underlying companies are accurately priced by the market or under- or over-priced. Keep in mind that we may have bought new companies or sold holdings after the posting of our portfolio on this website. It is our policy to post our holdings on each Fund's website 4 times each year, within 45 days of the end of the Funds' fiscal quarter. 3. Discount. You should compare the price of our stock to the NAV to see if you are buying shares of the Funds at a premium or discount to the NAV. That is, are you paying more or less for the Fund's shares than you would have to pay to buy the same basket of stocks directly. 4. Costs. You should look at our costs. Because all investment funds have expenses, the performance of a fund's stock will always be less than the performance of the fund's underlying assets. The disparity in performance will be the amount of the fund's expenses. For example, if a fund's assets earn 5% for the year and its expenses are 1.5%, then fund owners will net 3.5% and earn 30% less than if they bought the underlying assets directly. To get as good a return as you would from direct ownership of the underlying assets, you need to buy a fund's shares at a discount that is equal to the percentage you get when you compare the fund's expenses to its projected future earnings. Applying this to the above example, you would be as well off buying the hypothetical fund at a 30% discount to NAV as you would if you directly owned a proportionate share of the same underlying assets. This analysis is applicable to all investment funds, but with open-ended funds you never have an opportunity to buy their shares at a discount. 5. Management and Advisory Fees. You need to look at the management of our Funds and our track record and make a judgment about whether our performance, both past and potential, justifies our advisory fee. Investors should recognize that our expenses are among the highest of domestic equity funds. Thus, you need to make a judgment about our ability to pick winners in the future, how you expect our future performance to compare with our past, whether you want to have an indirect interest in the kinds of companies in which we invest at the prices we tend to pay, and whether you are willing to pay a premium for our management and discipline. Remember that our past performance is not necessarily indicative of future results. 6. Taxes. When evaluating the price of the Funds relative to NAV, you also need to take a look at whether the Funds have accrued tax loss carry-forwards and the extent to which they have unrealized gains or losses. If we have unrealized gains, we may choose to sell our appreciated holdings at any time and distribute those gains to you. You will then have to pay the income tax on those distributions. So there may be a deferred tax liability embedded in our NAV and since you will have nothing to say about when it is triggered, you may want to deduct this from the price you are willing to pay for the Funds' shares. However, until gains are realized, the embedded tax liability is like an interest-free loan from the government and shareholderswill reap any earnings on the deferred liability until it comes due. Of course, unrealized losses and tax loss carry forwards work in the opposite direction and provide a tax cushion for the future. If the Funds are profitable in the future,these losses will serve as a hidden asset to the Funds' shareholders. Investors should note that the tax situation with respect to either Fund may have changed from that existing as of the date of this writing or as shown in our most recent public reports. 7. Distributions of Gains. You should look at our past distributions to see if most of our distributions are long term gains or current income. You should also see how we have behaved in the past and whether we have been successful in deferring gains by buying stocks we can hold for a long time. The longer we can put off incurring the tax liability, the longer you can benefit from the compounding of those earnings. Remember, though, we don’t control the market, and market action (e.g, a takeover of one of our portfolio companies) or other events may cause us to do something that gives rise to greater tax liability than has been incurred in the past. 8. Investment Limitations. Most funds have "fundamental" investment policies that restrict their investment flexibility, that is, their ability to freely move in and out of investment sectors or industries when market conditions warrant. We believe that our Funds should have maximum flexibility and thus should be able to invest like you, an individual investor, who can move from one class of investment to another (e.g., large- to mid-cap, growth to income, domestic to foreign, financials to industrials, etc.) when market conditions change. Currently, the Funds probably have fewer "handcuffs" than many other investment companies. Similarly, most funds have specific investment styles and do well when that style is popular, but do poorly when it is not. The Boulder Funds have few restrictions other than those imposed by the Federal tax code and securities laws. Consequently, we are free to invest in almost any domestic security. Potential investors need to determine first whether you are comfortable with advisers who have (and are apt to take advantage of) such flexibility and then whether our existing policies and objectives place any limitations or “handcuffs” on our ability to provide you total return. So, if we are in the wrong area or sector, it is because we made poor choices, not because our policies and objective keep us there. Most funds compare their performance against their peer group or other investment companies with similar limitations. Being the best in a poorly performing class is no excuse for us. We measure ourselves against a broad objective, primarily the S & P 500 Index, because we have very broad investment authority. So, if we have poor results, it is our fault. 9. Size Matters. You should ask if the Funds are large enough. A large fund has several benefits, including its ability to spread its fixed expenses across a greater asset base. Also, it allows the Funds the clout necessary to be heard when encouraging management of our underlying companies to act in an owner-friendly fashion and take actions that will provide owners the maximum benefits. Our Funds are currently too small to be very effective in this area but the Funds' boards may well consider options to grow the Funds (e.g., rights offerings, new or additional leverage, etc.) so that we can be increasingly effective in these areas. You will of course want to compare us to your own standards as well but we think you will make better decisions if you include these items in your analytical process. We recommend you also look at the Funds’ prospectuses, recent proxies, and annual and semiannual reports(which also appear on this website) before you invest. Sincerely, Stewart R. Horejsi |
Click here to view the Nominating Committee Charter
Fund Administrative Services, LLC, the administrator for the Boulder Funds, also serves as the Administrator to another closed-end fund, First Opportunity Fund, Inc. To go directly to the website for this fund, CLICK HERE: www.firstopportunityfund.com
