Discovery Capital Corporation

Discovery Capital Corporation

August 29, 2005 19:05 ET

Discovery Capital Corporation Reports Second Quarter 2005 Results-Net Asset Value of $0.31 per Share at June 30, 2005

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Aug. 29, 2005) - 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 six months ended June 30, 2005.

Key points include the following:

- At June 30, 2005, net asset value ("NAV") per share of $0.31 was down by 30% 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 six-month period ended June 30, 2005 increased to 4.7%, compared to 3.9% for the year ended December 31, 2004. as a direct result of lower net asset values.

- Total results of operations were $(6,977,561) for the six-month period ended June 30, 2005, including a $(6,504,321) 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 Corp., Discovery Capital provides investment management services principally to British Columbia Discovery Fund (VCC) Inc. ("BCDF") a venture capital corporation established by the Company in 2002 that has raised over $28.0 million to date. 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 June 30, 2005.

During 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.

June 30, 2005 Financial Review

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

As at June 30, As at December 31,
2005 2004
(unaudited) (audited)
Statements of Financial Position
Net assets $15,774,332 $23,893,552
Unrealized (depreciation)
of investments (8,005,966) (1,501,645)
Net Asset Value per share $ 0.31 $ 0.44

Three months Three months Six months Six months
ended ended ended ended
June 30, June 30, June 30, June 30,
2005 2004 2005 2004
Statements of (unaudited) (unaudited) (unaudited) (unaudited)
Operations and
Realized gains
(losses) on
disposal of
investments $ (97,215) $ 640,244 $ (94,123) $ 252,155
Management fee
and other
income 210,194 282,109 426,686 533,519
Total gains
management fee
and other
income 112,979 922,353 332,563 785,674
Expenses (436,908) (437,317) (805,803) (962,207)
Change in
of investments (1,436,969) (6,327,555) (6,504,321) (80,689)
Total results
of operations (1,760,898) (5,650,977) (6,977,561) 32,715
Total results of
operations per
share $ (0.03) $ (0.10) $ (0.13) $ 0.00

During the six months ended June 30, 2005, the Company invested $1,531,782 into its existing portfolio companies, including $565,000 in Circon Systems Corporation and $480,000 in PhotoChannel Networks Inc.

At June 30, 2005, the Company had working capital of $916,579, as compared to working capital of $3,468,173 at December 31, 2004. The primary component of working capital is cash, which was $762,074 at June 30, 2005, a decrease of $2,488,088 from cash of $3,250,162 at December 31, 2004.

At June 30, 2005, the Company had Available for Sale Securities of $4,604,554, of which $1,558,446 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 June 30, 2005 and December 31, 2004, is as follows:

June 30, 2005 December 31, 2004
(unaudited) (audited)
Fair Value Cost Fair Value Cost
----------- ----------- ----------- -----------
Available for
Sale Securities $ 4,604,554 $ 9,035,068 $10,879,727 $ 8,860,554

Other Public
Investments 3,082,423 2,708,947 2,935,510 2,526,927

Private Investments 7,118,634 11,067,562 6,553,160 10,482,561
----------- ----------- ----------- -----------
Total Investments $14,805,611 $22,811,577 $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.

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)