Discovery Capital Corporation

Discovery Capital Corporation

May 31, 2005 16:44 ET

Discovery Capital Corporation Reports First Quarter 2005 Results-Net Asset Value of Cdn $0.35 per Share at March 31, 2005

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - May 31, 2005) -

All amounts are in Canadian dollars

Discovery Capital Corporation ("Discovery Capital" or the "Company") (TSX VENTURE:DVY.Y) is pleased to provide the following report on its activities and financial results for the three months ended March 31, 2005.

Key points include the following:

- At March 31, 2005, net asset value ("NAV") per share of $0.35 was down by 20% from $0.44 at December 31, 2004, due to a decline in the overall value of the Company's publicly-traded investments, and, in particular, declines in the value of the Company's holdings in PhotoChannel Networks Inc. and TIR Systems Ltd.

- Annualized unaudited management expense ratio for the three-month period ended March 31, 2005 improved to 3.2%, compared to 3.9% for the year ended December 31, 2004. This is the continuation of an improving trend since the beginning of 2004, primarily due to higher management fees being earned by the Company from British Columbia Discovery Fund (VCC) Inc. ("BCDF") a venture capital corporation established by the Company in 2002 that has raised over $27.0 million to date.

- Total results of operations were $(5,216,663) for the three-month period ended March 31, 2005, including a $(5,067,352) decrease in unrealized appreciation of investments arising almost entirely from declines in the trading prices of the Company's publicly-traded portfolio investments.

Through its wholly owned subsidiary, Discovery Capital Management Inc., Discovery Capital provides investment management services principally to BCDF. During the first two months of 2005, BCDF sold out its 2004 tax credit allocation of $10 million, being the second year in a row that the Fund achieved a sell-out. The Fund has a 2005 tax credit allocation of $10 million, and a further allocation of $10 million for 2006. Discovery Capital also holds its own portfolio of investments, having interests in 10 public and private companies as at March 31, 2005.

Subsequent to the end of the quarter, the Company completed a $1.0 million redemption offer made to its shareholders in April. The Company redeemed 2,500,000 of its common shares at a redemption price per share of $0.40.

March 31, 2005 Financial Review

Selected financial data derived from the Company's consolidated financial statements is as follows:

As at March 31, As at December 31,
2005 2004
(unaudited) (audited)
Statements of Financial Position
Net assets $18,598,464 $ 23,893,552
Unrealized (depreciation) of
Investments (6,568,997) (1,501,645)
Net Asset Value per share $ 0.35 $ 0.44

Three months ended Three months ended
Statements of Operations March 31, 2005 March 31, 2004
and Deficit (unaudited) (unaudited)
Realized gains (losses) on
disposal of investments $ 3,092 $ (388,089)
Management fee and other income 216,492 251,410
Total gains, management fee
and other income 219,584 (136,679)
Expenses (368,895) (524,890)
Change in unrealized
appreciation (depreciation)
of investments (5,067,352) 6,246,866
Total results of operations (5,216,663) 5,683,692
Total results of operations
per share $ (0.10) $ 0.10

During the three months ended March 31, 2005, the Company invested $380,000 into its existing portfolio companies, including $230,000 in Circon Systems Corporation and $150,000 in Cryopak Industries Inc.

At March 31, 2005, the Company had working capital of $2,876,699, as compared to working capital of $3,468,173 at December 31, 2004. The primary component of working capital is cash, which was $2,789,194 at March 31, 2005, a decrease of $460,968 from cash of $3,250,162 at December 31, 2004.

At March 31, 2005, the Company had Available for Sale Securities of $6,549,456, of which $2,900,107 is represented by the Company's shareholdings in TIR Systems Ltd. The Company has identified securities as "Available for Sale Securities" when those securities have readily determinable fair values (based on quoted stock market prices) and are not restricted from re-sale. A breakdown of the estimated fair value of the Company's investments, showing total cost and fair values at March 31, 2005 and December 31, 2004, is as follows:

March 31, 2005 December 31, 2004
(unaudited) (audited)
--------- -------
Fair Value Cost Fair Value Cost
----------- ----------- ----------- -----------

Available for Sale
Securities $ 6,549,456 $ 8,965,546 $10,879,727 $ 8,860,554

Other Public
Investments 2,334,947 2,558,903 2,935,510 2,526,927

Private Investments 6,783,610 10,712,561 6,553,160 10,482,561
----------- ----------- ----------- -----------

Total Investments $15,668,013 $22,237,010 $20,368,397 $21,870,042
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------

The Company believes that it has sufficient liquidity from cash on hand and its Available for Sale Securities to fund its operations and follow-on investment activity for the foreseeable future. Subsequent to quarter end, the Company funded a $1.0 million redemption offer to its shareholders at a redemption price of $0.40 per share.

For full details of the Company's first quarter 2005 financial results, please view the Company's financial statements and related Management's Discussion and Analysis which may be found on SEDAR at

About Discovery Capital:

With nearly 20 years of venture capital experience in British Columbia, Discovery Capital, through its wholly owned subsidiary, Discovery Capital Management Corp., is a venture fund manager and venture capital investor specializing in: information technology, communications, health and life sciences, and other advanced technologies. We have proven expertise in strategic planning, management development, innovative financing strategies, corporate governance and positioning for liquidity. Discovery Capital Management Corp. is the manager of British Columbia Discovery Fund (VCC) Inc., a British Columbia venture capital fund that has raised over $27.0 million to date.

Charles Cook, CFO

This news release may include statements about expected future events and/or financial results that are forward-looking in nature and subject to risks and uncertainties. The Company cautions that actual performance will be affected by a number of factors, many of which are beyond its control. Future events and results may vary substantially from what the Company currently foresees.

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of the content of this news release.

Contact Information

  • Discovery Capital Corporation
    John McEwen
    President and Co-CEO
    (604) 683-3000 ext. 106
    Discovery Capital Corporation
    Harry Jaako
    Chairman and Co-CEO
    (604) 683-3000 ext. 105
    Discovery Capital Corporation
    Charles Cook
    (604) 683-3000 ext. 102
    (604) 662-3457 (FAX)