Boulder Investments Fund Saga Gets Comical

But the cartoon doesn't end there.

Boulder's big appeal to investors is an 11% yield, which is to be paid monthly.

That's an astonishing payout. Investors everywhere are desperately hunting for income. No wonder so many raced to buy.

The problem?

Sure the fund is sending you a check every month. But it isn't income. They're just sending you back your own money.

As Boulder conceded two weeks ago: "Currently the dividend consists mostly of a return of capital to stockholders. A 'return of capital' represents a return of a stockholder's original investment in the Fund's shares, and should not be confused with a dividend yield."

Who built this income policy? The Acme corporation?

I spoke to Boulder spokeswoman Nicole Murphey to find the reason for this bizarre behavior. She explained that shareholders had voted for this fund's dividend policy a year ago.

The reason? Back then, the fund's shares were trading far below their value. So returning capital made sense.

The problem is that the plan worked so well that the shares stopped selling for a lot less than they were worth, and started selling for a lot more. Yet here they are, still handing back capital every month.

Murphey says the dividends came from income and a return of capital. The proportion of each varied month to month. Right now, she conceded, it was mostly just a return of capital.

But it doesn't stop there. In fact, the mind-bending nature of this cartoon only gets revealed in the final act.

Because the shares are now so valuable, Boulder announced last month the fund is going to ... sell more of them. It announced a "rights issue," which will allow investors to subscribe for extra shares.

Yes, that's right. Boulder is simultaneously handing investors back their cash and asking them ... for more cash.

Beep beep!

This may be excellent news for Boulder Investment Advisers. They get a fee based on the total assets. But it's hard to see why shareholders would pony up. In fact, it's hard to see why they should hang around in this fund at all. There are cheaper ways to have a laugh.