Black Friday - Sept.24: Crocus drops a bombshell
The following items were posted in September/04:
Fact: As of Friday, Sept. 24, 2004 Crocus Fund shares had fallen
to $10.61 - a $1.10 drop from the previous week's price of $11.71. Crocus
Fund shares had reached their all-time high of $15.39 on June 29, 2000.
Fact: Crocus received an investment of $10 million from
another labour sponsored investment fund, The Quebec Solidarité Fund,
in late 2002. Crocus is required to pay 10% interest on that investment
and, if the entire investment is not paid in full by November 15, Crocus
will have to pay an additional 10% in interest on top of the 10% it
is already required to pay.
Fact: According to the Crocus Fund prospectus, Crocus
is not required to repay shareholders their investments. See sections
8.03, 15.05 and 15.06 in the most recent Crocus Prospectus, currently
in PDF format on Crocus website in the financials section.
Here is a direct quote from Section 15.05 of the prospectus:
"Notwithstanding the requirement of the Fund to maintain
the Reserve Fund, there is no guarantee that the Fund will be in
a financial position to pay the Redemption Price for Common Shares
at the time that a redemption is requested. In that case, the Fund
may delay payment of the redemption Price for an indefinite period."
Fact: Winnipeg news media have almost totally ignored Crocus's
troubles. Whether it is because media outlets have been intimidated
into silence by Crocus's threats of lawsuits, or because Crocus is a
major advertiser in many of those same media, the result is the same:
Manitobans have been kept in the dark about Crocus's abysmal
investment record over the past few years.
The Winnipeg Free Press has been one of the staunchest supporters
of the Crocus Fund. No other mutual fund company comes close to spending
the amounts that Crocus Fund spends in this paper. For the past two years
the Free Press has gone so far as to print a special supplement prepared
by the Crocus Fund prior to RRSP season, but with these words emblazoned
across each page: "Special to the Free Press". Thus, unsuspecting readers
might easily be lulled into thinking that it is the Free Press which
is saying all these great things about the Crocus Fund. Any ethical newspaper
would avoid such a clear deception.
An examination of the Crocus Fund website http://www.crocusfund.com/
will show that the Free Press has served as nothing more than a
cheerleader for Crocus since its inception. There are over 74 Free Press
articles lauding the fund on the Crocus Fund website.
The most recent outrageous example of Free Press bias occurred
after Crocus Fund shares dropped a staggering $1.10 on Sept. 23. Rather
than provide its readers with any kind of analysis that would show how
badly Crocus has done, the Free Press accepted Crocus's pat explanation
that the drop in share values was nothing to be alarmed about.
Here is what the Crocus Fund had to say: "The adjustment is
primarily associated with ongoing information technology positions Crocus
took in the late 90’s where performance expectations have not materialized.
The optimism in the sector last year has not been sustained.
The investment cycle for venture capital is typically five to
ten years, which is consistent with Crocus’s long-term investment strategy.
As a result it is important to recognize that the year-end share price
is a point-in-time reference of value, and that the ultimate outcome
for any investment is known only when the investment position is sold."
When the Free Press simply reported Crocus's facile explanation
practically ver batim, the following question was put to the Free Press
reporter who wrote about Crocus's drop in share value: "After reading
your sugar-coated piece today, why would any Crocus investor have any
reason to worry?"
Here is the answer the Free Press reporter gave: "Sometimes because
of legalities of what you can say or can't say about a person's reputation,
newspapers leave it up to the reader to connect the dots on a story.
This is one such example. It shouldn't take long."
Crocus's record of abysmal investments: Anyone familiar
with Crocus's continuing record of losses would wonder how any right-thinking
person would continue to sink money into the fund. Just consider some
of the investments that have been written off in recent years: Westsun Sound
and Light - $20,915,442; SLMsoft.com Inc. - $8,622,576; Isoboard Enterprises
- $7,126,751; Winnport - over $7 million. The list goes on and on.
Why do Manitobans continue to give such great support to Crocus?
There is no doubt that Crocus has done a masterful job of persuading
Manitobans that investing in Crocus is a good thing, no matter what evidence
to the contrary may suggest. With an aggressive and shrewd advertising
campaign that trumpets the "tax credits" to be obtained by buying Crocus
Fund shares, thousands of individuals have bought into this unadulterated
swill. Not only that, institutions such as credit unions have pushed Crocus
Fund heavily, without warning their clients just how terribly risky an investment
in Crocus is.