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March 15, 2010 - Please note: 1) The B.C. government is responsible for generating Tax Credit receipts for 2009. BC Discovery Fund is sending these Tax Credit receipts to its shareholders as soon as it receives them from the Ministry. Receipts are being processed in batches, and it is hoped that this process will be successfully concluded by March 31, 2010. 2) BC Discovery Fund has no deferred sales charge (DSC). Commissions are paid by the Fund to investment dealers at the time of purchase by an investor and/or by trailer fee. 3) BC Discovery Fund suspended redemptions in December 2008 and it cannot predict when redemptions may re-commence. The ability of the Fund to re-commence satisfying redemption requests is dependent upon a number of factors which are highly variable and difficult to predict. Please refer to the Fund’s annual prospectus where matters pertaining to redemptions are described in detail. How can I invest in the BC Discovery Fund? What is the purpose of the BC Discovery Fund? What is the BC Discovery Fund? Is a VCC the same as a Labour Sponsored Fund? Are the tax credits the same as a Labour Sponsored Fund? When did the Fund start and how long has the manager been doing this? Does the Fund only invest in private companies? What happens if I buy too much? Will this affect my AMT? If I buy the Fund in January or February will I still get a tax credit for the previous year? Can I purchase the Fund through my self-directed discount brokerage? What is the minimum amount I can purchase? If my spouse and I purchase the Fund through our joint account, can the tax credit be divided? Can the fund be purchased within my RRSP and still be eligible for the tax credit?. On what line number of my tax return should I put my tax credit? If I dispose of shares of the Fund at a loss, do I realize a capital loss? When can I redeem my shares of the Fund? If the Fund suspends redemptions, how do I get on a waiting list for future redemptions? How can I invest in the BC Discovery Fund? Contact your broker or financial advisor to purchase the BC Discovery Fund (“BCDF” or the “Fund”). The fund codes are DCC100, DCC101, DCC102 and DCC104. If the firm that you are dealing with is not currently enabled to sell the Fund, please have them contact us so that we can set them up to process orders. You may also invest through most discount brokerage services. Investors must be residents of BC. What is the purpose of the BC Discovery Fund? BCDF was created to provide early-stage companies in the technology sector in British Columbia with a source of patient equity capital for the growth and expansion of their businesses and to provide British Columbia investors with an experienced and proven management team capable of maximizing shareholder returns from these investments. What is the BC Discovery Fund? BC Discovery Fund is registered as a venture capital corporation (“VCC”) under the Small Business Venture Capital Act (the “SBVCA”). Under the SBVCA, VCCs such as BCDF are established to make investments in Eligible Small Businesses in accordance with the provisions of the SBVCA, and to provide business and managerial advice to the Eligible Small Businesses in which they make investments. The SBVCA also regulates the kind of Eligible Small Businesses in which a VCC can invest. Investments in the Fund provide investors with a 30% provincial tax credit on investments up to $200,000. In order to be eligible for the tax credit, investors must be residents of BC. An investment in the Fund is also RRSP/RRIF eligible, potentially providing further tax savings. Is a VCC the same as a Labour Sponsored Fund? Although they appear to be similar, they are not the same. Labour Sponsored Funds are governed by both the Provincial and Federal government, with each level of government providing a 15% tax credit, to a maximum of $2,000 provincially and $750 federally per year. The Provincial government provides a 30% tax credit to investors in VCCs to a maximum of $60,000. Are the tax credits the same as a Labour Sponsored Fund? No, they are different in a couple of ways. Firstly, VCC tax credits are a fully refundable provincial tax credit. Even if no tax is owed, investors still get a refund from the Province. With a Labour Sponsored Fund, investors can only deduct the tax credit from taxes owing. Secondly, you can receive up to $60,000 annually in tax credits under the VCC program whereas the Labour Sponsored Funds only offer up to $2,750 per taxation year. When did the Fund start and how long has the manager been doing this? The Fund was launched in November 2002 and started raising funds by prospectus in March of 2003. The founding managers of Discovery Capital have been managing VCC funds in BC for over 20 years. Does the Fund only invest in private companies? The Fund is not restricted to investing only in private companies. It can invest in public companies providing that it purchases treasury shares – the Fund cannot acquire shares in the open market. What happens if I buy too much? Will this affect my AMT? The BC Discovery Fund provides investors with a 30% tax credit - not a tax deduction - so alternative minimum tax does not come into effect. The maximum available tax credit of $60,000 annually results in a maximum investment of $200,000 eligible for a 30% tax credit. This sounds too good to be true. How long has this program been around? And why have I never heard of it before? The VCC program has been around since the late 1980s. The reason most people have not heard about it before is because investments under the program were historically marketed on a much smaller scale to sophisticated investors and typically sold under private placement offering memorandums. The Fund is sold by way of prospectus and is sold by all the major brokerages. If I buy the Fund in January or February will I still get a tax credit for the previous year? Purchasing the Fund in January or February is not a guarantee of getting
a tax credit for the previous tax year. BC Discovery Fund is sold
under an allotment of tax credits from the Provincial government, which
is currently set at $10 million annually. When the current year’s
allotment is sold out, the Fund will make an announcement on this website. The Fund can commence sales of the following year’s allocation
as early as January 1. Investors receive a tax credit certificate in the mail from the Provincial government. If you have not received your tax credit by the end of March, please email Todd Riley at triley@discoverycapital.com or call 604-683-3000 ext. 115. Can I purchase the Fund through my self-directed discount brokerage? Yes, you can. The fund codes for purchasing this fund are DCC100, DCC101, DCC102 and DCC104. If your discount broker is not set up to sell the Fund, please call us and we will work with your broker to make the Fund available on their system. What is the minimum amount I can purchase? The minimum purchase amount is $2,500 to a maximum of $200,000. Minimum additional orders of $100 can be made at later dates. If my spouse and I purchase the Fund through our joint account, can the tax credit be divided? Yes. The tax credit will arrive with both names and SIN numbers on the certificate. Either person can claim the tax credit. To have separate tax credits issued, please call Todd Riley at 604-683-3000 ext. 115. Can the fund be purchased within my RRSP and still be eligible for the tax credit? Yes. You can also purchase the fund within a locked-in RRSP or RRIF. On what line number of my tax return should I put my tax credit? Enter the tax credit amount on line 6049 or 6050 of form BC 479 on your
income tax return. A redemption of a share is treated as a disposition for proceeds equal to the redemption price paid by the Fund. Generally, an investor will realize a capital loss if the proceeds of disposition of shares of the Fund are less than the investor’s adjusted cost base of those shares and all reasonable costs of disposition. However, any capital loss that arises must be reduced by the amount of tax credits received in respect of the shares. A simple example – if an individual purchased shares at a price of $10.00 per share, held them for the minimum five years required by the Fund, and redeemed them at a price of $8.50 per share, the $1.50 per share capital loss is reduced (in this case, eliminated) due to the $3 tax credit received when the shares were originally purchased. If a capital loss is realized by an RRSP or RRIF, the amount of any capital loss may not be deducted by the annuitant of the plan. Refer to Income Tax Considerations in the Fund’s prospectus and consult your own tax advisor. Redemptions of shares are subject to the restrictions set out in the Articles of the Fund. Shares will not generally be redeemable until after five years from the date on which they were issued. Shares may be redeemed during the one month period prior to the five-year anniversary date of their issuance provided that the shareholder is concurrently making a new subscription for shares on terms and conditions acceptable to the Fund. The only other circumstance where shares may be redeemed prior to the five-year anniversary date of their issuance is in the case of the death of the original purchaser or where they have devolved to a holder as a consequence of the death of a registered owner and the Fund has received proper notice. The Fund has the right to decline redemptions in a number of circumstances and you should refer to the prospectus of the Fund for full particulars and consult with your financial advisor. If the Fund suspends redemptions, how do I get on a waiting list for future redemptions? Shareholders who have held their shares for five years or longer may request redemptions at any time, even if the Fund has suspended redemptions. They must do so by having their financial advisors place a redemption order through the FundSERV network. Those orders will automatically reject and a rejection contract will be issued, however there will be a time and date stamp of the request to, in effect, establish a “waiting list” of redemption requests received by the Fund. When the Fund is in a position to re-commence satisfying redemption requests, the Fund will first process those requests on the waiting list, in the order in which they were received, and in priority to any redemption requests received on the date of re-commencement. Financial advisors of the shareholders on the “waiting list” will be contacted and given 10 business days to re-enter a valid order in the FundSERV network to complete the redemption, which will be processed on the next valuation date at the Pricing Net Asset Value per share on that date.
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