Venture capital firm Flanders Valley Language Fund (FLV Fund) has posted a loss of $57.8m for the financial year 2000.
The firm has gained notoriety for not only being the first global selective fund to focus entirely on applications of Speech, Artificial Intelligence and Language technology (S.AI.L.). but also because of losses relating to irregularities connected with it setting up a Korea-based fund.
FLV reported $51.9m of its losses in the fourth quarter of 2000, $28.7m of which resulted from the misappropriation of funds it had transferred to set up a Korea-based fund, FLV Fund Korea. In a statement FLV advised: “As a result of irregularities within FLV Fund Korea those assets were illegally pledged and subsequently seized by Hanvit Bank, against which legal proceedings have been initiated.”
In a long-running saga that PEO continues to cover, FLV Fund had planned to put $30m into its FLV Fund Korea for investment in technology companies. Lernout & Hauspie Speech Products in Korea ‘assisted logistically’ with setting up the fund. Although FLV Fund Korea had not been launched, the $30m it had put towards the fund was used as collateral to a loan to the former head of Lernout & Hauspie Korea, John Seo, “as a private individual”. FLV says that the money was pledged by Seo to Hanvit Bank, a major Korean Bank that is also a customer of L&H Korea. Hanvit Bank then chose to call in this amount prior to the deadline it had set Seo for honouring interest payments on its loan to him.
The firm also announced that it has made $26.2m in non-realised losses on investments, debt securities and loans receivable as a result of writedowns. In its statement the fund says that this reflects “the delay in progress in several portfolio companies, including an appraisal of the impact of the difficulties surrounding L&H on the development of some portfolio companies.”
FLV Fund's cash position at December 31, 2000 was $46.2m. The company says that the cash is sufficient for the medium term but as reported in PEO last month, it is looking for strategic partners. Its statement said: “Looking ahead, the board of directors is looking for strategic partners and thereby aims to ensure a valuation based on the fair value of its portfolio. At December 31, 2000, this fair value amounted to $9.48 per share.”
Last year, FLV invested $42.1m. Of that amount, $21.4m went into 15 new portfolio companies and $20.7m went into follow-on investments in 26 companies.
At the end of 2000, FLV Fund had net investments totaling $96.4m in 55 portfolio companies, including the issuance of debt securities and loans to portfolio companies, and after taking into account a total amount of $28.3m in write-downs.