jv flv

ANNUAL REPORT
FLV FUND C.V.A.
2003
CONTENTS
1
COMPANY PROFILE
3
2
SELECTED FINANCIAL DATA
4
3
MESSAGE TO THE SHAREHOLDERS
6
4
COMPANY ADMINISTRATION AND CONTROL
8
5
STATUTORY MANAGER
10
6
OPERATIONAL HIGHLIGHTS 2003
13
7
DESCRIPTION OF PORTFOLIO COMPANIES
17
8
FINANCIAL STATEMENTS
27
9
FINANCIAL CALENDAR
49
p. 2
1
COMPANY PROFILE
FLV Fund C.V.A. (FLV Fund or the Fund or the Company) was incorporated in December 1995 as a
venture capital company providing risk capital to companies developing applications for speech and
language technology interfaces, and later also for other artificial intelligence technology in following
business segments: security and telematics, telecom, edutainment and business intelligence and
processes.
FLV Fund was introduced on the Nasdaq Europe Stock Exchange in July 1998. Due to the closure of that
exchange, the listing of the shares was moved to the New Market of Euronext Brussels on October 15,
2003 under the symbol FLV.
FLV Fund was substantially affected by the general reversal of the interest in technology related activities
in the course of 2000, aggravated by a USD 30 million loss resulting from the embezzlement of the
capital funds of its subsidiary FLV Fund Korea.
In the fall of 2001, FLV Fund restructured and adjusted its business plan to realize its investments
through a gradual and orderly negotiated exit of the portfolio companies. The proceeds thereof are
being used for a gradual refund of the shareholders. Target date for completion of the winding up is
December 31, 2004.
FLV Annual Report 2003
p. 3
2
SELECTED FINANCIAL DATA
2.1
General
In thousands of EUR
Financial assets
December 31
2003
2002
9.594
17.926
Other investments and deposits
Cash at bank and in hand
11.137
2.568
4.247
13.680
34.038
Write-offs of fair value of financial
assets
7.206
36.139
Loss for the year
7.995
37.481
20.504.495
20.504.495
Capital and reserves
Shares outstanding
FLV Fund maintains its books and records in EUR.
p. 4
2.2
Share Price
0,50
0,45
0,40
0,35
0,30
0,25
0,20
0,15
0,10
0,05
dec 2003
nov 2003
oct 2003
sep 2003
aug 2003
jul 2003
jun 2003
apr 2003
may 2003
mar 2003
feb 2003
jan 2003
dec 2002
oct 2002
nov 2002
sep 2002
aug 2002
jul 2002
jun 2002
may 2002
apr 2002
mar 2002
feb 2002
0,00
Evolution closing prices in 2002 and 2003 (EUR) on Nasdaq Europe and Euronext. (Euronext as from
October 2003)
The FLV Fund shares (symbol: FLVF) were introduced on the Nasdaq Europe Exchange on July 10,
1998.
In November 2000, Nasdaq Europe authorities decided to trade halt the financial instruments (shares
and warrants) in FLV Fund. The trade halt was lifted on October 5, 2001.
On March 19, 2002, an aggregate amount of EUR 28,02 million or EUR 1.36 per share was reimbursed
to the shareholders following the decision to decrease the capital by the extraordinary shareholders’
meeting of December 27, 2001.
On January 6, 2003 an extraordinary shareholders’ meeting decided to decrease the share capital to EUR
31.9 million through the refund of EUR 12.3 million in aggregate or EUR 0.60 per share.
On October 15, 2003 all of FLV Fund’s shares were listed on the New Market of Euronext Brussels due
to the closure of the Nasdaq Europe market operations. As of November 14, 2003 FLV Fund voluntarily
de-listed from the Nasdaq Europe Stock Market
The closing price on December 31, 2003 was EUR 0.28 per share.
FLV Annual Report 2003
p. 5
3
MESSAGE TO THE SHAREHOLDERS
The past year was primarily a year in which the attention and energy of Management and the Board was
directed to the execution of the business plan that was approved in the extraordinary shareholders’
meeting of October 2001.
All the results of the sustained efforts were not very visible in the course of 2003. Yet in the last weeks
of the year and in the beginning of 2004 signals came through that FLV Fund is making progress in
converting some of the portfolio assets into cash.
A first successful operation was the sale of the GRIC shares. The increase of the stock price offered an
opportunity, which we seized to recover most of the write off made earlier.
Furthermore, the Fund could look forward right after year-end to the full reimbursement of € 1.340.000
of the convertible loan that it had extended to G2Speech B.V. In the last week of February 2004 the Fund
successfully concluded the sale of the participation in Cellport.
More cost saving measures were implemented. The number of people working for the Fund was
reduced to only three part-time employed persons. The change in ownership of the Ieper campus
made it possible to terminate the existing lease without extra compensation. The company address was
moved to Aartselaar where the Fund has its office, keeps its records and finds adequate administrative
support.
The cost saving in combination with the realization of some important portfolio assets offers perspective
for adequate liquidity, which might allow for an extra capital return payment to the shareholders. As soon
as the liquidity target is reached the procedure for the reduction of capital will be started. As provided
by law such decision needs to be submitted to an Extraordinary Shareholders Meeting. Upon approval
of the Board’s proposal the decision must be published in the Belgisch Staatsblad (Official Belgian state
Gazette). Payment could only take place at the earliest two months after the official publication.
In the last two years FLV Fund has already returned to the shareholders € 1.36 and € 0.60 per share
respectively.
In view of some speculative rumors that at times seem to spring up it seems appropriate to repeat again
that it is extremely difficult to predict whether FLV Fund will be able to make further payouts or what
the proceeds will be.
Indeed, the value of the FLV Fund shares is determined by the remaining portfolio assets and by the
outcome of the claim that FLV Fund Korea introduced against Woori (formerly Hanvit) Bank. That claim
is currently pending before the Court of Appeals of Seoul. Another important factor will be the evolution
of the class action and the other related actions that have been introduced in the United States in the
matter of Lernout & Hauspie, in which FLV Fund has been assigned as a related party. Those lawsuits are
p. 6
currently pending before the U.S. District Court of Massachusetts. They require substantial professional
monitoring to protect the rights of FLV Fund. Even though we are much cost conscious, the legal cost is
burdensome and cannot be avoided. Recovery of those expenses is uncertain.
As explained in the portfolio description the fair market value of the remaining portfolio published at
year-end is conservatively stated. FLV Fund remains committed to finding a solution that combines the
interest of the portfolio companies looking for continuity and growth with the interest of the FLV Fund
shareholders to see the 2004 objective being accomplished.
I would like to thank again everyone who, in the past year, has contributed to accomplishing our
business plan, in particular the members of the management team and my colleagues of the Board of
Directors. The constructive attitude and the cooperation shown by the portfolio companies during the
recent due diligence procedure were also fully appreciated. Last but not least we thank all shareholders,
in particular those that attend the general meeting or share with us their viewpoints and comments.
Aartselaar, February 18, 2004
The Chairman
Magrepat N.V.
Marcel Asselberghs
FLV Annual Report 2003
p. 7
4
COMPANY ADMINISTRATION AND CONTROL
4.1
General
The Articles of Association of FLV Fund provide that one statutory manager, who must be a shareholder,
manages FLV Fund. The statutory manager appointed in the Articles of Association for the duration of
the Fund is FLV Management N.V.
FLV Management N.V. was incorporated on December 22, 1995.
FLV Management’s purpose is to act as the statutory manager of FLV Fund. The Articles of Association of
FLV Management do not allow it to act as a general partner of any other fund.
4.2
Shareholder structure of FLV Management N.V.
FLV Management was incorporated with an issued and paid up capital of € 247.894, represented
by 10.000 shares. Its shares are currently held by GIMV N.V., Lessius Management Consulting N.V.
and S.AI.L Trust V.Z.W., ((in liquidation) each holding one third of the shares, who have signed a
shareholders’ agreement among them.
GIMV N.V. is a venture capital company in which the government of Flanders indirectly holds the
majority of the shares while 30% of the shares are publicly quoted on Euronext Brussels.
Lessius Management Consulting N.V. is a fully owned subsidiary of Lessius N.V.
S.AI.L. Trust V.Z.W. is a non-profit company that promoted the Flanders Language Valley concept.
4.3
Holders of financial instruments of FLV Fund C.V.A.
All shares of FLV Fund are bearer shares. Pursuant to Belgian law, holders of voting financial instruments
of publicly listed companies must disclose their holdings of voting financial instruments when certain
thresholds are met. Companies can furthermore decide to make these disclosure requirements more
stringent. The Articles of Association of FLV Fund provide that the relevant thresholds are set at 3%, 5%
and multiples of 5%.
In October 2000, BB High Tech A.G., a Swiss institutional investor, disclosed its ownership of 1,042,500
of ordinary FLV Fund shares (currently 5.06% of the outstanding ordinary shares of FLV Fund).
On June 10, 2003, the Brookdale Group (based in Boston) disclosed that it owned 3.242.862 (15.74%)
of the outstanding shares of FLV Fund.
p. 8
The number of outstanding warrants originally issued to the personnel and certain consultants to FLV
Fund under the warrant plan, as approved by the extraordinary shareholders’ meeting of May 4, 1998
(i.e. 792,000 warrants issued of which 18,500 have already been exercised) did not change.
As at December 31, 2003, shares and warrants held by members of the board, executives and employees
of FLV Management N.V. are not considered material.
4.4
Corporate Governance
The board of directors of FLV management N.V., the statutory manager of FLV Fund, sets the strategy,
supervises the investment policies and the operational procedures. The board reviews at regular
intervals the actions taken by management for compliance with those policies and procedures.
In view of the size and the nature of the operation the Remuneration Committee has been dissolved.
The Audit Committee reviews the scope of the internal controls and the implementation by
management of the recommendations of the statutory auditor. The Audit Committee is composed by
Marcel Asselberghs (independent director) and Wilfried Vandepoel.
Due to the reorganisation the former Executive Committee has ceased to operate and the decisions on
all investments and divestitures with a financial impact of over € 1 million are now approved by the
Board of Directors.
During 2003, the Audit Committee met four times.
In accordance with the Belgian Law of August 2, 2002 on corporate governance the board appointed
Piet Vandermeersch as the permanent representative (vaste vertegenwoordiger) of FLV Management
N.V.
FLV Annual Report 2003
p. 9
5
STATUTORY MANAGER
FLV Management N.V. is the Statutory Manager of FLV Fund C.V.A.
5.1
Board of Directors of FLV Management N.V.
As of December 31, 2003 the composition of the Board of Directors of FLV Management was as follows:
Magrepat N.V. (represented by Marcel Asselberghs)
Alex Brabers
Martin De Prycker
Lessius Management Consulting N.V. (represented by Wilfried Vandepoel)
Piet Vandermeersch
Van Marcke J. Investments N.V. (represented by Jean Van Marcke)
Chairman
Director
Director
Director
Director
Director
Marcel Asselberghs (65) is the former Managing Partner of Arthur Andersen Belgium.
Alex Brabers (39) joined GIMV as Investment Manager in 1990. Alex started his career in 1987 in the
banking industry, first as a trader in international money market instruments, later in the strategic
planning department. He holds an Economic degree from the University of Louvain.
At GIMV, Alex was responsible for successful international venture capital investments in the field of ICT
and Telecom. He supported the investments actively, several of which were exited through either trade
sales or IPO’s. He is currently a board member of, among others, Telenet, Mobistar, Option International
and Telos.
Martin De Prycker (49) held several positions in Alcatel between 1982 and 1996. He was President of the
Alcatel division for ADSL broadband products from 1996 until 2000. From 2000 till 2002 he was Chief
Technology Officer of Alcatel and a member of the Executive Committee. In 2002 he became President
and CEO of Barco.
Wilfried Vandepoel (59) is the Managing Director of Lessius Management Consulting N.V., a Belgian
based provider of sevices in the risk capital and financial industry. He serves as a director of several
industrial companies such as Lamitref Metals, Recticel and Duvel Moortgat.
Piet Vandermeersch (66) became an independent business consultant in 1989 after a 25 year career in
international banking. Since then he took up several managerial assignments such as the start up of
Aquafin NV and Telenet NV plus various advisory positions in about 25 projects.
Jean Van Marcke (66) is the Chairman of Lessius and Lamitref Industries and he also serves on the board
of several large, mostly publicly listed companies.
The board of directors can only validly deliberate and resolve when at least half of its members are
p. 10
present or represented. In the event that the quorum is not met, a new board meeting may be convened
to deliberate and decide on matters on the agenda of the preceding board when at least three directors
are present or represented.
5.2
Management Team on December 31, 2003
Vamas N.V. (represented by Piet Vandermeersch)
Cyriel Baeyens G.C.V. (represented by Cyriel Baeyens)
Van Houtte Management Services BVBA
(represented by Paul Van Houtte)
CEO
CFO
Senior Investment manager
Cyriel Baeyens (63) has a background as auditor and tax expert. He served as controller at Continental
Bank NV (later Banco Central Hispano NV ) for more than 15 years before joining J. Van Breda & Cie as
group controller. In 2001 he was appointed Chief Financial Officer of FLV Management .
Paul Van Houtte (34) holds a graduate degree in Business Economics and a Master’s degree in Financial
Management. Additionally, he followed advanced executive educational programs at Insead, Wharton
and MIT. He joined Henkel where he held management positions in Belgium and at HQ in Germany.
He later became a manager at Norkom Technologies, working in the Benelux and in Dublin, Ireland. Mr.
Van Houtte joined the investment team of FLV Management in September 2000.
5.3
Remuneration, Management fees and expenses
Since April 1, 2003 FLV Management has no longer salaried staff. All executive work and administration
is done by the management team.
In 2003 remuneration of the management team was € 366.219 compared to € 199.310 in 2002. The
personnel cost in 2003 was € 124.725 compared to € 911.916 in 2002.
The remuneration of the Board of Directors of FLV Management NV. Was € 55.816 in 2003 while in
2002 it was € 73.980.
The internal regulations of FLV Fund provide that FLV Fund must reimburse FLV Management N.V. for
its operating expenses, including salaries, compensation benefits and administrative expenses. Fees for
legal, tax, financial advisors as well as commissions relating to investments are either directly charged to
FLV Fund or, to the extent possible, to the portfolio company concerned.
In connection with the restructuring, the board of directors of FLV Management has proposed to the
extraordinary shareholders’ meeting of October 26, 2001 to approve an amendment of the Internal
Regulations, whereby it was provided that the restructuring costs (then estimated to be in the amount
of EUR 2 million) would be charged to FLV Fund. As from 2002, the annual current operating expenses of
FLV Management to be reimbursed by FLV Fund, may not exceed EUR 3 million. In accordance with the
above amendment, which was approved by the extraordinary shareholders’ meeting, FLV Management has
charged to FLV Fund in 2003 current operating expenses of EUR 1 million compared to 2.3 million in 2002.
FLV Annual Report 2003
p. 11
The services of the management team are provided under a standard management services agreement
by which FLV Management purchases a number of service days at a market per diem rate from the
respective management companies Vamas NV, C. Baeyens GCV and P. Van Houtte Management Services
BVBA. The agreement with Vamas NV runs until December 31, 2004 and is renewable. There is a two
months cancellation notice. The agreements with C. Baeyens GCV and P. Van Houtte Management
Services BVBA have no expiry date but can be cancelled on four month notice.
No unusual payments or other liabilities are foreseen upon termination of either one of the contracts.
There are no commissions or profit sharing arrangements.
5.4 Auditor
Van Passel, Mazars & Guerard C.B.V. Bedrijfsrevisoren, represented by Mr. Hugo Van Passel and Mr.
Lieven Acke. The audit fee amounted to € 49.730 in 2003.
In addition the audit fee for FLV Management NV. was €11.679.
p. 12
6.
OPERATIONAL HIGHLIGHTS 2003
6.1
General
The Board of Directors meets at least once a quarter to follow up and to evaluate the activity. In 2003
the Board met five times. The Board also reviews the financial data, in particular the evolution of the
investment portfolio. It also sets priorities for exit opportunities.
The Audit Committee meets every quarter.
The Annual Shareholders’ meeting took place on March 20, 2003.
On January 6, 2003 there was an Extraordinary Shareholders Meeting to decide a capital reduction of
€ 12.362.697 to be distributed to the shareholders at € 0.60 per share outstanding.
The management team worked on three priority targets. First of all, the regular review of and contacts
with the portfolio companies in order to protect FLV’s interest and to explore appropriate exit
opportunities. This led in the second half of the year to extended negotiations with a British French
combination for a takeover of practically all of the portfolio assets. Another major task is the following
up of the legal procedure that FLV Fund Korea has started before the Seoul courts to recover the capital
funds that without its consent or knowledge were pledged to and collected by the Woori (formerly
Hanvit) Bank. The third major task is the defense of FLV Fund in the class action suit and other legal
procedures that have been brought against FLV Fund as one of the co-defendants, before the U.S.
District Court of Massachusetts. These are all related to the acquisition by third parties of Lernout &
Hauspie (L&H) stock between 1998 and 2000.
At the same time great care has been taken to reduce operational costs to a minimum.
6.2
Legal procedures in Korea
For a summary of the findings of the Seoul District Court that dismissed the claim of FLV Fund Korea
against Woori (formerly Hanvit) Bank, we refer to the 2001 Annual report (chapter 6.2) or to our
website www.flvfund.com. In January 2001, immediately after the first court decision, FLV Fund Korea
appealed against that judgment. Since then several additional actions were undertaken to bring clarity
about the facts and the legal issues. A number of petitions were made through the courts to third
parties that reportedly were involved in the proceedings, in order to identify the people involved
and to clarify the circumstances. FLV Fund introduced a formal complaint against the Woori Bank for
violation of the Korean banking law and prevailed. The Seoul District Court issued a summary judgment
imposing a fine on the bank. We cooperated with the Korean prosecutor and actively participated in the
confrontation that he set up with other witnesses. When as a result it was discovered that the signature
of FLV Management’s CEO had been falsified (counterfeited) we requested a full investigation of the
circumstances in which that happened. When later the prosecutor decided to temporarily suspend
or set aside his investigations against Joo Chul Seo we appealed to the higher prosecutorial authority.
Finally we established the whereabouts of a number of FLV Fund shares that are still being held by MT
Tech and took conservatory measures to have those attached.
FLV Annual Report 2003
p. 13
Towards the end of the year the FLV Fund attorneys included the results and all new information that
came out of the actions in a final comprehensive brief that has been submitted to the Seoul Court of
Appeals. Until now the Court had not yet set a new hearing date. We trust that the submission of the
brief will trigger a reconvening of the procedure, which could result in a verdict around the middle of
the year.
6.3
Legal procedures in the United States of America
In the course of the fourth quarter one additional complaint was served on Flanders Language Valley
Fund and Flanders Language Valley Management and more than forty defendants by the Trustee of the
Dictaphone Litigation Trust, successor-in-interest to the claims of Dictaphone Corporation.
In essence the complaint looks similar in nature to the complaints that were filed in 2002 and before, by
the Stonington Group, the shareholders of Dragon Systems Inc, the Baker and the Bamberg family. All
those parties are seeking compensation for damages that they allegedly suffered in exchanging their shares
for L&H shares. The new complaint refers to facts and allegations that were already brought forward in the
other complaints and that have been covered extensively in the media. As in the previous cases FLV Fund
has asked its attorneys to submit a motion for dismissal. As yet no hearing date has been set.
In the meantime the part of the class action suit (and consolidated actions) in the Lernout & Hauspie
Securities litigation that concerns FLV Fund, has moved one step further. On July 24, 2003 the U.S.
District Court of Massachusetts allowed the plaintiffs’ request for discovery against FLV Fund but
limited it to jurisdictional discovery only, i.e. to the question whether or not FLV Fund is subject to
the jurisdiction of a U.S. court. Discovery has taken place in the meantime and motions have been
submitted. The Court has not yet published a decision.
The cases are all still in an early phase. The sheer number of parties involved, both on the side of the
plaintiffs as well as on the side of the defendants, is likely to cause further delays. Estimates about timing
are uncertain at best. However the process itself imposes an unreasonable burden on a co-defendant
such as FLV Fund. Just to protect its ability to continue functioning pending the final outcome, FLV Fund
is obliged to bear a heavy cost to monitor, intervene and preserve its rights. At this point in time neither
the Board of Directors nor legal counsel can express an opinion on the outcome.
6.4
Execution of the October 2001 Business Plan
The efforts to realize the portfolio assets through an orderly negotiation and sales process continued
throughout the year.
After a few early successes with individual sales it became apparent that a proactive and structured
market approach was needed to identify interested parties. The process was set up with the assistance
of Degroof Investment Bankers and the Baker & McKenzie Law office. Although it yielded several
contacts and exchanges of information the result in terms of actual sales was disappointing. For almost
every participation, the main challenge is to strike a balance between the interest of FLV Fund and its
shareholders in getting a fair price and the ambition of the company and its shareholders to ensure the
p. 14
company’s continuity and success by acquiring the shares at a low investment cost. In most cases outside
third parties are effectively barred from the sales negotiation because of preemption or other restrictive
rights that are written into the respective shareholder agreements for the benefit of all co-investors.
Around the middle of the year a European combination of a French based investment fund for secondary
private equity transactions and a U.K. based British investment manager expressed its interest in the
acquisition of all or at least a major part of the participations of the FLV Fund portfolio. The Board
approved the entering into formal negotiations that could lead to the sale of those assets and set FLV’s
objectives. The potential acquirer had asked for exclusivity for the duration of the negotiations including
for the period required for the customary due diligence. All portfolio companies were contacted and
cooperated promptly and constructively. Notwithstanding the hard work it became clear by the middle
of December that parties would not reach full agreement on the terms for completion of the asset
transfer. The negotiations were terminated.
Subsequently FLV Fund reviewed its other options with the advisors. Based upon market reactions
and a marked interest of some other potential acquirers, FLV Fund has taken the initiative to submit
to a number of selected professional investors a synopsis of the portfolio on offer, reflecting the latest
developments in each participation and including an indicative value estimate. Discussions with the
parties interested in a “portfolio” transaction will be held in the first quarter of 2004. The alternative
for a portfolio transaction, if that cannot be done, is selling each of the participations separately. There
are indications that the stability of the core portfolio and the improvement in the investment climate
encourages investors to enlarge their stake by taking up additional shares.
6.5
Portfolio overview
The management of the FLV Fund CVA investments remains one of the primary tasks of the statutory
manager.
The revenue to be made from the realization of the assets is hard to estimate. Each quarter all the
participations are carefully reviewed on the basis of the data provided by the company and any other
information collected externally. In 2003 FLV Fund has further refined these quarterly evaluation
procedures. The starting point remains a line-by-line evaluation of each one of the participations or
other assets. We take into account the amount historically invested, the write offs and revaluations and
the most recent information about the company’s turnover, cash flow and/or profits plus the outlook
and expectations of the company’s management. Added to that are qualitative considerations such as
stability, predictability, management quality and general market conditions. An important additional
element in the estimation is the information that is collected as a result of the sales efforts and active
negotiations with potentially interested parties. Although considerable efforts are made for arriving at
the best possible estimate, one cannot guarantee that the evaluations reflect the price that will actually
be paid by the market. The estimate made file by file is conservative. However when the transfer or
takeover is the result of a global portfolio transaction the buyer tends to negotiate a discount on the
overall price to compensate for liquidity.
FLV Annual Report 2003
p. 15
The valuation by management and the proposals for adjustment are submitted to the Board for review
and approval together with the opinion of the Audit Committee that takes into account the conclusions
of the review of the external auditors.
As explained in the previous annual reports the value of the portfolio decreased substantially over the
last two years and the relative size of the investments fluctuated considerably. In 2003 there was a
further decrease. Excluding the capital refund transaction of € 12.3 million (€ 0.60 per share), the fair
market value of the portfolio (including cash) declined by € 8.1 million to € 13.7 million or € 0.66 per
share which is comparable to € 21.7 million or € 1.05 per share on December 31, 2002. The decline is
due to external events such as in the case of Keyware whose shares were temporarily trade-halted even
though the bankruptcy proceedings have been cancelled in the meantime and to the declaration of
bankruptcy of Acunia. In the case of Shazam FLV Fund declined to participate in a new financing round,
which caused a downward review of the value. Furthermore FLV Fund decided to disengage from two
privately held companies. As a precaution, because of the uncertainty about the recovery of the value,
a € 3 million write-off was taken.
The gains made on the sale of listed securities could not offset the above write offs. The recovery of the
GRIC shares was a very positive development. On December 31, 2003 the share price of GRIC stood
at $ 5.36 against $ 2.48 on December 31, 2002. On October 15, 2003 the stock price reached a peak
of $ 8.15. FLV Fund took advantage of this rise and sold its 203.974 shares at an average share price of
$ 6.675. In addition about one third of the Fund’s Tele Atlas shares was sold at an average of € 3.46.
In line with current objectives and due to the many changes the distinction in business subsections
and geographic distribution is much less relevant. In the remaining portfolio twenty-four assets are
still accounted for. They are primarily active in ICT related technology. For operational efficiency the
portfolio was regrouped in three main segments.
The first segment consists of eleven active participations that have reached a certain level of maturity.
The companies have demonstrated a capacity for regular turnover growth, positive cash flow and/or
profit potential and appropriate management qualifications. Need for follow-on investments is expected
to be limited and would primarily be used for expanding a proven business concept. Those participations
represent the core of the asset portfolio that FLV Fund is offering for takeover by an investor interested
in stepping into an already operational business entity.
The second segment of the portfolio consists of four participations, which for various reasons (legal
structure, type of activity, management preference, stage of development…) are considered to be less
apt for transfer in a portfolio transaction. For each of those a separate negotiation with an individual
party seems to be more appropriate.
The third segment contains nine participations of which the value was virtually written down to zero and
for which the exit process has already been started. The follow up of those assets is important for two
reasons. In some cases one cannot exclude a limited positive development. And although there are no
manifest risks or liabilities the monitoring is good practice in order to protect the interest of FLV Fund
until full closing, which in some cases is in the hands of an external third party.
p. 16
7
DESCRIPTION OF THE PORTFOLIO
COMPANIES
FLV FUND
Telecom
Edutainment
Business
Intelligence &
Processes
Adeptra
Explio
C&T Paradigm
Authentor
Systems
M-Commerce
Ventures
Liberty-TV.com
Cegeka
Voicevault
Buytel
Onset
Technology
Qarbon
Changing Worlds
Captor
TeleMessage
Shazam
Entertainment
Financial
Architects
Cellport
Systems
G2 Speech
Keyware
Technologies
Inno Fund
Tele Atlas
Irion
Transics
Voxtron
Security &
Telematics
HAL
FLV Annual Report 2003
p. 17
7.2
Evolution in 2003
7.2.1 Follow-on investments
Amount in EURO
Company
Country
Type
Inno Fund
Belgium
Equity
83.333
M Commerce
Ventures
Singapore
Equity
198.758
Changing Worlds
Ireland
Equity
150.000
432.091
TOTAL
FLV Fund has no further investment commitments.
7.2.2 Divestments
Company
Country
Transaction
Type
M Commerce
Ventures
Singapore
Redemption of
equity
147.224
Gric
USA
Sale of shares
482.548
Tele-Atlas
The Netherlands
Sale of shares
134.393
TOTAL
Amount in EURO
764.165
In 2003 total revenue from sale of Gric and Tele-Atlas shares was € 1.730.195 resulting in a net recovery
of prior years write-offs of € 1.113.254.
p. 18
7.3
Description Portfolio Companies
Adeptra – United Kingdom
www.adeptra.com
First investment
Equity funds invested
FLVF position
Q3 2000
£ 2 mio
6,21 %
Activity
Adeptra provides a managed service to deliver unique alerting system that notifies your customers
of time-critical events, with built-in response options that let them resolve the situation immediately.
Target clients are banking, travel, telecom and retail enterprises who use their services to increase their
profitability.
Authentor - United States
www.authentor.com
First investment
Equity funds invested
Loan
FLVF position
Q 2 2000
$ 3 mio
$ 0,1 mio
20,21 %
Activity
Founded in 1998, Authentor Systems provides security solutions that control, manage and protect user
access to e-Business applications. As larger and more diverse groups of users access wider ranges of Webbased applications, strong security and management of access became critical. To help organizations
safely compete in today’s e-Business environment, Authentor has developed a comprehensive family of
secure web access technologies - SmartPath™. SmartPath™ ensures that critical e-Business applications
remain accessible to authenticated, authorized users, without exposing those same resources to attack
from unauthorized users. SmartPath™ provides an integrated, open and scalable security framework
that provides essential user access and authentication management services, including Web Single Sign
on: Broad Authentication Methods Support, Role-based Access Control, Web-based Delegated Admin,
Fine-Grained Authorization and Behavior Tracking and Adaptation.
BuyTel / VoiceVault - Ireland
www.voicevault.com
First investment
Equity funds invested
FLVF position
Q4 1999
€2,5 mio
5,8 %
Activity
VoiceVault (1996) is a voice verification security company that uses voice verification biometrics to
provide a range of business solutions. Voicevault’s technology is present in the top tier as of accuracy,
value and speed of verification.
FLV Annual Report 2003
p. 19
Captor - Belgium
www.captorgroup.com
First investment
Equity funds invested
FLVF position
Q3 1999
€ 2,3 mio
21,54 %
Activity
The Captor group (1987) is a total solution provider in the Time & Attendance - market. Over the years,
Captor has developed both software and hardware solutions that can be linked with existing solutions
for complementary applications such as Payroll, Enterprise Resource Planning and Human Resources.
Captor focuses on software development, thereby concentrating on the implementation of functionality
in the Time & Attendance software environment. With respect to hardware, Captor has out-sourced
the manufacturing, logistics and repair but retains the ownership of the intellectual property rights and
distributes hardware through a worldwide network of VAR’s for Factory Data Collection and Time &
Attendance. The company is currently active in the Benelux, France, Germany and UK.
C&T Paradigm - Belgium
www.ctparadigm.be
First investment
Equity funds invested
Loan
FLVF position
Q4 2000
€ 0,6 mio
€ 0,8 mio
16,58 %
Activity
C&T Paradigm (1998) operates a division that executes Phase-I clinical trials for major pharmaceutical
companies. The other division Brainspeech® researches and develops automated/computerized
cognitive tests to replace the routine procedures of an assessment session. It thereby reduces the
cost of testing cognitive functions focused on deficits in aspects of memory, attention and information
processing speed associated with diseases or conditions such as Alzheimer’s, Minimal Cognitive
Impairment, Cardio-Vascular Accident, Schizophrenia and Attention Deficit and Hyperactivity Disorder.
Cegeka - Belgium
www.cegeka.com
First investment
Equity funds invested
FLVF position
Q3 1999
€ 2,2 mio
9,0 %
Activity
The company develops and implements ICT products and services for security, environment, healthcare
and finance. Cegeka continues to identify and to invest in new opportunities; hereby positioning itself
as a major service provider.
p. 20
CellPort – United States
www.cellport.com
First investment
Equity funds invested
FLVF position
Q1 1999
$ 7,4 mio
14,59 %
Activity
Founded in 1992, Cellport Systems develops hands-free wireless systems for the automotive industry
based on its patented universal connectivity platform. This platform is becoming an open standardsbased gateway for in-vehicle telematics applications. Cellport’s flagship product, the Cellport 3000 with
Voice Command, is the first voice-activated universal hands-free system. The innovative Pocket Adapter
design allows users to change wireless phones without removing and then reinstalling a conventional
car kit by snapping a new Pocket Adapter for each cell phone into the Universal Docking Station.
Changing Worlds - Ireland
www.changingworlds.com
First investment
Equity funds invested
FLVF position
Q4 2001
 1,4 mio
9,0 %
Activity
Changing Worlds is a pioneer in the development and deployment of advanced personalization
technologies with a strategic focus on the mobile space. The company’s ClixSmart personalization
engine enables the next generation of intelligent information services to learn about the needs and
preferences of users and to automatically personalize the delivery and presentation of information
content according to the specific requirements of each individual. Some European telecom players
such as Vodafone & O2 adopted the Changing Worlds technology in their operations.
Explio - Belgium
www.dewildecbt.com
First investment
Equity funds invested
FLVF position
Q2 1999
€ 0,2 mio
1,4%
Activity
Established in 1989 as De Wilde CBT, Explio offers with its ace II, a web-based language learning platform.
The software allows for content conversion into XML-HTML based interactive language exercise tools.
The company is present in 4 countries (Belgium, the Netherlands, France and the US).
FLV Annual Report 2003
p. 21
Financial Architects - Belgium
www.finarch.com
First investment
Equity funds invested
FLVF position
Q1 1999
 3 mio
28,71 %
Activity
Financial Architects (1997) is an international provider of business intelligence and financial reporting
software. Finarch’s flagship product is Financial Studio, an innovative business intelligence application
that addresses the multiple reporting needs of banks, insurance companies and financial institutions. Its
customer list includes ABN Amro, HSBC, Euroclear, Banque Artesia, ING Group,… Finarch has offices
in Belgium, Luxemburg, UK, US and Spain.
G2 Speech – The Netherlands
www.g2speech.com
First investment
Convertible loan
Q1 2000
€ 1,3 mio
Activity
G2 Speech, founded in 1998, is a developer of speech recognition applications for the legal, financial
and medical market. At present G2 Speech is mainly active in the Netherlands and Belgium, although
both the US and the UK are being targeted as well.
HAL (Home Automated Living) – United States
www.automatedliving.com
First investment
Equity funds invested
Loan
FLVF position
Q4 1999
$ 1,6 mio
$ 0,01 mio
10,5 %
Activity
HAL (Home Automated Living) develops and markets voice controlled home automation software. Its
software turns the home-PC at a reasonable cost into the controlling heart of your home. Different
functions are incorporated such as: home control capabilities, making it possible to control electrical
device via your PC or via your phone. Additionally Internet retrieval capabilities are featured. At userdetermined intervals, the HAL engine goes out to the Internet and collects the data that the user has
identified upfront.
p. 22
Inno.com - Belgium
ww.inno.co
First investment
Equity funds invested
FLVF position
Q3 1998
€ 0,3 mio
33,30 %
Activity
The company, founded in 1999, is the leading edge provider of creative ICT solutions for integrated
processes based on state of art but proven technologies. Four domains are within the core competency:
Strategic ICT consulting, Breakthrough Projects, Revitalization of legacy systems, Software and
Integration Architecture.
Irion Technologies - The Netherlands
www.irion.nl
First investment
Equity funds invested
FLVF position
Q2 2000
€ 0,4 mio
15,59 %
Activity
The company develops and distributes intelligent natural language based cross-lingual search software.
Keyware – Belgium
www.keyware.com
First investment
Equity funds invested
FLVF position
Q3 1996
€ 4,4 mio
10,31 %
Activity
Keyware provides biometrically enabled application for user-authentication, ranging from IT security
over physical access and time & attendance to customer loyalty, electronic payment & ticketing
applications…. Keyware stock quotation on Euronext was temporarily halted in 2003 but was later on
resumed.
FLV Annual Report 2003
p. 23
LibertyTV.com – Luxemburg
www.libertytv.com
First investment
Equity funds invested
FLVF position
Q4 1999
€ 1,5 mio
4,07 %
Activity
LibertyTV.com is the first pan European channel dedicated to tourism and holidays. Due to its broadcasting
capabilities, call center and Internet presence it provides the European traveler with a complete information
overview of destinations and current tourist offerings. It provides tour operators with a powerful medium
to inform and sell their travel offerings with some acquisitions of tour operators executed by LibertyTV.
Additionally it is a strong medium for advertisers to target a pan European and specific audience.
M-Commerce Ventures - Singapore
www.edbvm.com
First investment
Equity funds invested
FLVF position
Q2 2000
Sing $ 1,7 mio
7,02 %
Activity
M-Commerce Ventures is a closed-end investment fund investing in start-ups and development stage
companies that are developing new capabilities and markets in the provision of Internet and other value-added
services over mobile telecommunications technologies such as mobile telephony. The Fund seeks to achieve
medium to long-term capital appreciation through direct equity investments in these new/young companies.
EDBV Management Pte Ltd is the fund manager. M-Commerce Ventures was set up in February 2000.
Content of the portfolio consisting out of following companies; Akumiitti (Finland), Arrakiis Wireless
(Singapore), Inmobia (Sweden), Ismap SA (France), New Palm (China), n Tels Co (Korea); Orange Gum
(Singapore) & Accord Customer Care Services Ltd.
Onset Technology - Israel / US
www.onsettechnology.com
First investment
Equity funds invested
FLVF position
Q3 1998
$ 3,1 mio
12,17 %
Activity
Onset Technology provides solutions that convert messages - including fax, email and attachments into device-independent information that individuals and businesses can easily and immediately access
and use. Their products are ASP (Application Service Providers) service offerings for individuals and
workgroups, enterprise offerings for corporations, and as carrier offerings for telco, application service
providers and Internet service providers. Onset partners amount to names such as Compaq/HP, IBM,
Intel, Ericsson, T-Mobile, Motorola, Cingular, Nextel, AT&T Wireless & Bell Mobility.
p. 24
Qarbon – United States
www.qarbon.com
First investment
Equity funds invested
Loan
FLVF position
Q2 1999
$ 2,4 mio
$ 1,0 mio
34,36 %
Activity
Founded in 1997, the Company publishes an authoring tool, ViewletBuilder, that lets one create animated
online demos of how software works. Qarbon’s proprietary Viewlet technology provides businesses
with powerful audio-visual training tools that enhance the effectiveness of online marketing, employee
training and customer support. The Viewlet technology has been adopted by major corporations for
internal and external publishing purposes: Sony, Oracle, Agilent, IBM, Cisco,…
Shazam – United Kingdom
www.shazamentertainment.com
First investment
Equity funds invested
FLVF position
Q3 2001
£ 1,4 mio
10,01 %
Activity
Shazam! Entertainment (2001) has developed a real-time song identification service for mobile phone
users. The service, launched in august 2002, is based on a patent-pending technology in audio pattern
recognition. Shazam! Entertainment´s technology is able to match a noisy audio sample captured on
a mobile phone against a database of hundreds of thousands of songs in less than one second. The
search works even with background noise such as people talking or street noise, as long as the music
is dominant. Shazam! Entertainment will also provide business-to-business services such as monitoring
music and advertising on radio and television, ensuring that artists are paid royalties for public
performances of their music.
TeleAtlas - The Netherlands
www.teleatlas.com
First investment
Q1 2001
Share swap Phonetic-Topographics (PT)
Shares held:
149.822
Neuer Markt:
TA.6
Activity
Since its foundation in the Benelux in 1984, Tele-Atlas has become a major supplier of digital map
databases. With coverage in both Europe and North America, Tele Atlas’ digital maps are used in the
three key areas of the geo-referencing market: location-based services (LBS), geographic information
systems (GIS) and car navigation. Tele Atlas is actively increasing coverage worldwide and is continuously
updating and adding detail to its map databases.
FLV Annual Report 2003
p. 25
TeleMessage – Israel
www.telemessage.com
First investment
Equity funds invested
FLVF position
Q2 2000
$ 1,9 mio
1,8 %
Activity
TeleMessage (established in 1999) provides universal messaging services (UMS) that enable service
providers and enterprises to send, receive, and forward voice, text and multimedia messages from any
communication medium — the Internet, Outlook mail client, WAP-enabled device or any fixed-line or
mobile phone. Multi-Media messages can be sent to individuals or groups and to any communication
device, including landline phone, mobile phone, fax, e-mail, SMS, Instant Messenger (e.g. ICQ), and pager.
Once these messages are received, they can be replied to or forwarded to any communication medium.
Transics - Belgium
www.transics.com
First investment
Equity funds invested
FLVF position
Q4 1998
 2,1 mio
8,5 %
Activity
The company founded in 1990 develops and distributes on board computer and telematics solutions for
the transportation and logistics sector.
Voxtron - Belgium
www.voxtron.com
First investment
Equity funds invested
FLVF position
Q1 2000
 2,7 mio
12,56 %
Activity
The Voxtron Group develops and sells user-friendly computer telephony applications. Voxtron,
headquartered in Belgium, has offices in Belgium, Singapore, Hong Kong, India, and the Philippines.
One of the main distribution channels of Voxtron is Siemens. Furthermore, Voxtron has established an
Axxium Partnership Program.
p. 26
8
FINANCIAL STATEMENTS
STATUTORY AUDITOR’S REPORT FOR THE YEAR ENDED
DECEMBER 31ST 2003 TO THE SHAREHOLDERS’ MEETING
OF THE COMPANY FLV FUND CVA
In accordance with legal and statutory requirements we are pleased to report to you on the performance
of the audit mandate which you have entrusted to us.
We have audited the financial statements as of and for the year ended December 31st 2003 which have
been prepared under the responsibility of the Board of Directors and which show a balance sheet total
of 14.265 K€ and a loss for the year of 7.995 K€. We have also carried out the specific additional audit
procedures required by law.
Unqualified audit opinion on the financial statements with an emphasis of matter paragraph
We conducted our audit in accordance with the standards of the “Institut des Reviseurs d’Entreprises /
Instituut der Bedrijfsrevisoren”. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, taking
into account the legal and regulatory requirements applicable to financial statements in Belgium.
In accordance with those standards, we considered the company’s administrative and accounting
organisation, as well as its internal control procedures. Company officials have responded clearly to
our requests for explanations and information. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes assessing
accounting principles used and significant accounting estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, taking into account the applicable legal and regulatory requirements, the financial
statements give a true and fair view of the company’s assets, liabilities, financial position as of December
31st 2003 and the results of its operations for the year then ended, and the information given in the notes
to the financial statements is adequate.
We draw the attention to the directors’ report in which pending litigations are disclosed. According
to the directors’ report, the outcome of these litigations can not be assessed; no provisions regarding
these litigations nor legal costs were accounted for. Article 633 of the Companies Code is applicable to
the company. The Board of Directors has proposed to the General Assembly, having power to decide in
this matter, to continue the activities of the company.
FLV Annual Report 2003
p. 27
Additional certifications and information
We supplement our report with the following certifications and information which do not
modify our audit opinion on the financial statements:
-
The directors’ report contains the information required by law and is consistent with the financial
statements. We draw your attention to the Board of Directors’ comments on pending litigations.
-
Without prejudice to certain formal aspects of minor importance, the accounting records are
maintained and the financial statements have been prepared in accordance with the legal and
regulatory requirements applicable in Belgium.
-
No transactions have been undertaken or decisions taken in violation of the company’s statutes
or Company Law which we would have to report to you. Article 633 of the Companies Code is
applicable to the company. The appropriation of results proposed to the general meeting complies
with the legal and statutory provisions.
Ghent, March 1st 2004
Van Passel, Mazars & Guerard
represented by
Hugo VAN PASSEL
Lieven ACKE
p. 28
FLV Annual Report 2003
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FLV Annual Report 2003
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FLV Annual Report 2003
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FLV Annual Report 2003
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FLV Annual Report 2003
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FLV Annual Report 2003
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FLV Annual Report 2003
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FLV Annual Report 2003
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FLV Annual Report 2003
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FLV Annual Report 2003
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p. 48
9
FINANCIAL CALENDAR
FLV Fund has set following dates for the release of financial information with respect to its financial
results:
•
•
•
•
Results for the first quarter of 2004 will be released on May 7, 2004
Results for the second quarter of 2004 will be released on August 6, 2004
Results for the third quarter of 2004 will be released on November 5, 2004
Results for the fourth quarter of 2004 and annual results for 2004 will be released on February 25, 2005
The annual meeting of the shareholders of FLV Fund is held each year on the third Thursday of March.
In 2005, this meeting will take place on March 17.
FLV Annual Report 2003
p. 49
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FLV Annual Report 2003
p. 51
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p. 52