A Cautionary Tale: Flanders Language Valley Fund


Flanders Language Valley Fund was founded in 1995. This website was created to promote the fund.

Flanders Language Valley Fund is out of business.
Content is from the site's archived pages as well as from other outside press sources.

It is the first global selective venture capital fund, to focus on companies developing products and services which incorporate speech, artificial intelligence and language technologies. FLV Fund looks for innovative interface solutions (which make the user interaction more intuitive, personal and effective) and the intelligence in the network behind. The firm provides financing to companies with high growth potential. It invests between $1 million and $7 million. Flanders Language Valley Fund is based in Ieper, Belgium.

Company Profile

Sector: Financials
Industry: Asset Management
Sub-Industry: Private Equity
Flanders Language Valley Fund CVA operates as a venture capital firm. The Company focuses on automotive, telecommunications, multimedia, industrial, security, and consulting sectors. Flanders Language Valley Fund serves clients in Belgium.

Corporate Information

Patteelstraat 24
Ieper, 8900
Phone: 32-5-722-94-30
Fax: 32-5-720-68-42



2006 Press Release

FLV Fund CVA (in liquidation) - Financial Statements for 2006

Press release FLV Fund CVA (in liquidation) - Financial Statements for 2006
On December 31, 2006 the balance sheet total of FLVFund CVA was € 1,009,607 compared to € 1,205,621 the year before. After the decision to liquidate the company was made (December 16, 2005) the business activity was furter reduced to nil. Of the three participations remaining two were converted into cash while the last file has been written off.
For the full year a net loss of € 20,506 was posted. The year before the loss was € 408,455.
On December 31, 2006 the capital and reserves of FLV Fund CVA were € 694,999 compared to € 715,505 on December 31, 2005. As the number of shares outstanding remained unchanged at 20,604,495 the fair market value per share also was practically unchanged at € 0.034.
The annual financial statements and the report of the liquidation trustee are available on www.flvfund.com
and also on www.euronext.com
For information please contact the liquidation trustee VAMAS N.V. (Piet Vandermeersch)  +32 (0) 477 572 837




Flanders Language Valle}' Fund, in short “F.L.V. Fund"
Limited Partnership with a Share Capital
(“Commanditaire Vennootschap op Aandelen - Societe en Commandite par Actions'')
Bedrijvencentrum Rupelstreek (BC), Antwerpsesteenweg 124, 2630 Aartselaar, Belgium
Registry of Legal Persons 0456.906.622


Since on the extraordinary shareholders’ meeting held on June 20,2005 the quorum to deliberate and resolve was not reached, the statutory manager of Flanders Language Valley Fund Comm. VA, a limited partnership with a share capital, organized and existing under the laws of Belgium (commanditaire vennootschap op aandelen / societe en commandite par actions) has the honor to invite the holders of securities issued by the company to attend a second extraordinary general shareholders’ meeting which shall be held on July 12, 2005, at 10:00 a.m. The meeting shall take place at Bedrijvencentrum Rupelstreek (BC) Antwerpsesteenweg, 2630 Aartselaar (Belgium) (or at such other location as will be indicated there at that time).
Agenda and proposed resolutions - The agenda and the proposed resolutions of the general shareholders’ meeting are as follows:
1. Capital decrease through reimbursement to the shareholders
Proposed resolution: The general shareholders’ meeting resolves to decrease the company’s share capital with an aggregate amount of €5,151,123.75 to bring it from an amount of €9,202,021.39 to an amount of €4,050,897.64.
The decrease of share capital will be realized through the reimbursement in cash of an amount of €0.25 to each of the 20,604,495 existing shares of the company, being 5,151,123.75 in aggregate.
The decrease of the share capital will be carried out without cancellation of the existing shares of the company, and will be borne by each of the existing shares in the same manner, and each share shall represent the same fraction of the company’s new share capital. The capital decrease shall be allocated in its entirety to the fully paid-up share capital.
In accordance with Article 657juncto Article 613 of the Belgian Company Code, the funds to be reimbursed pursuant to the capital decrease may not be distributed to the shareholders as long as the claims of possible creditors who in accordance with the aforementioned provision 613 of the Belgian Company Code, within a term of two months following the publication of the resolution to decrease the company’s share capital in the annexes to the Belgian Official Gazette, have made a claim for an additional surety for receivables that have arisen prior to, and that have not yet been settled at, the date of publication of the resolution to decrease the company’s share capital in the annexes to the Belgian Official Gazette, unless such claims for additional surety have been rejected by an enforceable ruling by a competent court of law.
The statutory manager of the company shall inform the shareholders of the moment on which the funds will be reimbursed in accordance with the above, and of the formalities that have to be complied with for the reimbursement of the funds.
Holders of bearer shares must request payment within a term of three months after the start of the reimbursement of the funds. If at the end of this term there are still funds, which have not been claimed, then the company shall be entitled pursuant to the Belgian Act of July 24, 1921, to deposit these funds with the Deposito- en Consignatiekas. There, the funds shall be held for the shareholders who did not claim the reimbursement.

  1. Capital decrease in order to compensate for losses incurred

Proposed resolution: The general meeting resolves to decrease the share capital, by means of a formal capital decrease, with an amount of €3,284,146.93 to bring the share capital from an amount of €4,050,897.64 to an amount of €766,750.71 through incorporation of the losses incurred as at December 31, 2004, and without decrease of the number of shares.
The formal capital decrease will be carried out without cancellation of the existing shares of the company, and will be borne by each of the existing shares in the same manner, and each share shall represent the same fraction of the company’s share capital.

  1. Amendments to the company’s Articles of Association

Proposed resolution: Pursuant to abovementioned decreases of the share capital, the general shareholders’ meeting resolves to restate the first sentence of Article 5 of the company’s Articles of Association in view of the company’s share capital following the approval of the capital decreases concerned, and to complete the history of the company’s share capital by adding additional paragraphs to Article 5 of the company’s Articles of Association.

  1. Special powers of attorney

Proposed resolution: The general shareholders’ meeting resolves to authorize the company’s statutory manager, “Flanders Language Valley Management”, with the right of substitution, to execute and implement the resolutions of the shareholders’ meeting, including to do all what is necessary and/or useful for the reimbursement pursuant to the capital decrease referred to under item 1 of the agenda.
Proposal to resolve to grant special powers of attorney in connection with the restatement of the company’s Articles of Association and the amendment of the company’s registration with the Registry of Legal Persons and VAT administration pursuant to the resolutions of the general shareholders’ meeting.
Majority - The proposed resolutions under items 1 to 3 of the agenda shall be passed if they are approved with a maj ority of 7 5 % of the shares present or represented. The proposed resolutions under item 4 of the agenda shall be passed if approved by a simple majority of the votes cast. There shall be no quorum requirement.
Admission to the general meeting - In order to be admitted to the general shareholders’ meeting, the holders of securities issued by the company must comply with article 21 of the company’s Articles of Association and article 536 of the Belgian Company Code, and must fulfill the following formalities and make the following notifications:

  1. Holders of registered shares must be registered in the company’s share register book and must inform the company of their intention to participate to the meeting at least five (5) full days prior to the meeting.
  2. Holders of bearer shares must deposit at the registered office of the company at least five (5) full days prior to the meeting either their security, or a certificate issued by a recognized account holder with the clearing agency of the company’s shares, or issued by

    the clearing agency itself, confirming the number of shares that have been registered in their name and stating that the shares are blocked until after the date of the general meeting.
    Power of attorney - The holders of securities issued by the company who wish to be represented at the shareholders’ meeting by means of a power of attorney are requested to use the sample of power of attorney (with voting instructions) that is made available at the company’s registered office. Holders of securities must deposit their written power of attorney at the registered office of the company at least four (4) full days prior to the meeting.
    In order to facilitate an expedient registration, the participants are requested to be present at least half an hour prior to the start of the meeting.
    On behalf of Flanders Language Valley Management NV,
    Statutory Manager, represented by Piet Vandermeersch, Permanent Representative



Flanders Language Valley Fund

This  study is part of the European Union T.S.E.R. project "Industrial districts and localized technological knowledge" (INLOCO).  I wish to thank Robin Cowan, Jan Cobbenhagen and Claire Nauwelaers and those attending the Nice Seminar of the INLOCO research group for comments on a previous version of this paper.

René Wintjes
University Maastricht,
Postbus 616, 6200 MD  Maastricht
Tel: (31) (0) 43-3883893
Draft, November 1999

Based on the presence of Lernout  & Hauspie Speech Products (L&H) as the core technological firm, and the availability of multi-lingual engineers and highly educated linguists in the Belgian  province of West  Flanders, the Flanders Language  Valley (FLV) initiative was launched to create a world-wide centre of competence in speech and language technologies.

As soon as the idea of building FLV was launched in 1995 a group of institutional and private
investors  were  interested  in  what  they  saw  as  good  investment  opportunities.  The  Fund
initially  started  with  5,6  million  USD  and  began  to  invest  in  dynamic  high-tech  companies which  focused  on  applications  based  on  language  and  speech  technology,  or  closely  related 11 technological fields. The FLV Fund approached promising companies that were in search of venture  capital  to  start  up  a  business  or  to  grow  after  a  succesful  start-up  period.  The  first company the fund  invested in was Voxtron in 1995, a Belgium start-up. Since then the FLV fund has invested in some 34 companies and this number is growing with approximately one firm per month.

The  concept  of  a  venture  capital  fund  specialised  in  one  sector  was  not  new.  In  the  USA  as well  as  Europe  there  were  already  some  specialised  venture  capital  funds,  e.g.  in  ICT  orBioscience,  but  never  in  just  one  technology.  The  FLV  Fund  had  60  million    USD  under management  before  they  got  listed  in  July  1998  on  the  Eastdaq  (a  Brussels-based,  pan- European  exchange  for  growth  companies,  in  co-operation  with  Nasdaq  in  the  USA).  The most  important  names  on  the  list  of  investors  are:  GIMV,  Artesia,  Microsoft,  Lessius,
Kredietbank  and  Mercator-Noordstar.  In  1997  Microsoft  Corporation  invested  three  million USD in the FLV Fund. This increased the visibility of the Fund enormously.

Some  50  companies  from  Asia,  the  US  and  Belgium  contacted  them.  Out  of  these  requests six  to  seven  concrete  opportunities  were  selected.  This  is  an  important  point,  since  the screening  procedure  typically  canvasses  the  opinion  of  L&H  and  the  other  firms  in  order  to validate  the  technological  and  commercial  capabilities  of  potential  candidates  to  see  if  there could be some common interest or complementarity. In other words, it is part of the strategy to  look  for  possible  technological  spill-overs  between  the  firms.  In  the  beginning  the technological complementarity was reflected by the fact that almost every firm the FLV fund invested  in  was  a  client  of  L&H.  Almost  all  of  the  firms  use  L&H  technology  in  their applications.

Later  on  the  FLV  companies  also  started  to  license  technology  from  each  other.  This  is  a
slightly different point, but again verry important. To lisence something you have to know it
exsists.  These  firms  know  about  each  other  and  what  they  are  doing  because  of  the  FLV
canvassing    procedure.  These  licence  agreements  can  be  conceived  as traded
interdependencies.  However,  when  the  management  of  the  FLV  Fund  selects  new  firms  to expand  the  network  of  FLV  companies  they  certainly  have  the  localising  effect  of  untraded interdependencies in mind, as do the firms themselves.

More  than  half  of  the  FLVcompanies  are  foreign.  In  some  cases  the  FLV  Fund  invested  in both the ‘mother company’ (located outside Ieper and in many cases outside Europe) and in
the start up of a European office in Ieper. One of the criteria to select firms to invest in is the
interest  they  show  in  a  location  on  the  FLV  Campus  in  Ieper.  Not  every  firm  is  already
present in Ieper, but some are, spread throughout the city, waiting for the campus to be built.
In 1999 the first 10 companies have located at the campus. Twenty additional units will soon 12

follow  and  eventually  some  100  firms  will  be  located  around  the  campus.  After  the  start  of the  FLV  Fund  the  non-profit  FLV  Foundation  started  to  develop  and  carry  out  plans concerning education, incubation services, building the campus, et cetera.  



2010 Press Release

Lernout and Hauspie Found Guilty of Fraud



Jo Lernout and Pol Hauspie, once thought to be the bright future of Flanders' technological development, were this week found guilty in a Ghent court on a range of charges, including fraud. After 20 months of deliberation, the court found that the pair of entrepreneurs had invented non-existent contracts with customers in order to hype their company, Lernout & Hauspie Speech Products (L&H), and drive up its share price.

Massive trial reaches verdict, but no decision yet for thousands of investors

Jo Lernout and Pol Hauspie, once thought to be the bright future of Flanders' technological development, were this week found guilty in a Ghent court on a range of charges, including fraud. After 20 months of deliberation, the court found that the pair of entrepreneurs had invented non-existent contracts with customers in order to hype their company, Lernout & Hauspie Speech Products (L&H), and drive up its share price.

The fraud only came to light in 2000 after Microsoft obtained a stake in L&H, sparking interest in a company from an obscure corner of West Flanders whose success story seemed too good to be true.

Last Monday's verdict, which had not been read out in full by the time Flanders Today went to press, was the culmination of an investigation that started in 2001 and a case that saw thousands of mainly small investors losing fortunes. At one point, the attendance at the trial was so large the proceedings had to be moved from the justice palace to the International Convention Centre in Ghent.

This week, only Lernout and Hauspie, as well as senior directors Nico Willaert and Gaston Bastiaens, were present in the court. Other defendants were represented by their lawyers. At the reading of the verdict, four of the absent accused were immediately acquitted - one of the company's lawyers, two members of the legal service and the director of the Flanders Language Valley Fund (see below).

The court ruled that the rights of the defence had in their cases been breached. A number of procedural matters, including some raised by Dexia Bank, were then dealt with and, in the main, overruled by the bench. Motions to have evidence ruled out were rejected, but the substantive verdicts were still awaited.

Lernout & Hauspie was founded in 1987 by Jo Lernout and Pol Hauspie, two entrepreneurs from Ypres, West Flanders, whose goal was to teach computers to understand spoken language - an idea that must have seemed to belong to the realm of science fiction at the time, and which has still not been fully realised.

They financed their company by asking for support from friends and family: private investors provided €1.11 million in the first five years. In addition, L&H received venture capital of €750,000, with the backer pulling out after a year with a profit of 30%. The Flemish government, meanwhile, gave out grants worth up to €750,000 a year in R&D subsidies, as well as more than €3 million from the risk capital fund GIMV.

The two entrepreneurs managed to carry a lot of people along on their dream journey. The company was seen as a representative of the new Flanders, focused on new technology rather than dated industries such as coal. It was also a boost to West Flanders, and Ypres in particular, which had long been associated only with the tragedy of the First World War. The local pride, together with a limitless future for computers, convinced a great many people to sign up. The civil side of the case, which will be dealt with at a later stage, involves some 15,000 former shareholders who are claiming damages that could amount to €1 billion.

From the outset, L&H's dreams far outstripped the reality. Speech recognition programmes had been developed by the US military in 1971. In 1982, the Dragon company was founded, but it only developed the continuous speech dictation software Naturally Speaking in 1997, a decade after L&H had started up. The Ypres company, meanwhile, saw the use of its speech technology products limited to toys and gadgets.

In 1993, American telecoms giant AT&T invested €7.5 million. L&H was quoted on the Nasdaq technology index, and the company carried out a series of takeovers. In 1997, Microsoft took an 8% stake in the company for a price of $45 million (€34.5m), which rocketed L&H to world attention, but which also brought it under closer scrutiny that would eventually lead to its downfall.

L&H had ambitious plans not only to develop as a company, but to be in the forefront of a technological revolution in West Flanders. They opened Flanders Language Valley (FLV) in 1997. Essentially a business park, FLV was intended to become a hot spot where cutting- edge tech companies would gather and crossfertilise, along the lines of Silicon Valley. The Flanders Language Valley Fund, a venture capital outfit, had its offices in FLV right next to L&H.

In 2000, L&H took over Dictaphone for a massive €690 million, €300m of it debt. Less than three weeks later it took over Dragon itself for €353m - a small sum for a company whose Nasdaq rating set its worth at €11.6 billion.

But the huge acquisitions aroused the curiosity of the Wall Street Jour- nal, which did a little digging into the company and reported that most of its Korean customers didn't actually exist. Continued investigation uncovered a range of irregularities in the company's accounts, which led to the suggestion that L&H had hyped their own success as a means of manipulating the share price, which went into freefall as a re- sult of the allegations.

The American stock market regulator SEC began an investigation, and the share price fell even further. Thousands of investors, including most of the West Flanders business community, saw their investments turn to ashes.

The company made some partial admissions and filed for bankruptcy protection. Hauspie stepped down in November, and Lernout followed in March of 2001. The police arrived at L&H in April and placed Lernout and Hauspie in detention, where they spent nine weeks, charged with stock market manipulation, forgery and criminal conspiracy. The company was declared bankrupt in October 2001 and its assets bought up by US company Scansoft that December.

The case against the two men, as well as 19 others, including Dexia Bank and auditors KPMG, started in Ghent in 2007, with the prosecution calling for sentences of five years for the two businessmen. Hauspie pled guilty to fraud, but Lernout continued to claim his innocence. The case ended before the court in January 2009; since then the three-man bench has been consid- ering a case file amounting to 400,000 pages of evidence. This week's judgement alone runs to 2,100 pages and would take two weeks to read out.




2002 Press Release

Lernout & Hauspie Korea CEO accused of fund misuse

February 6, 2002 11 / www.cnet.com

A Belgian venture capital company reportedly accuses the head of the speech-recognition software maker's Korean unit of misappropriating $30 million of its money and initiates legal steps to recover it.

IEPER, Belgium--Flanders Language Valley Fund, a Belgian venture capital company, has accused the head of Lernout & Hauspie's Korean unit of misappropriating $30 million of its money and is taking legal steps to recover it, according to a report citing FLV spokesman Johnny Kegels.

The chief executive of Lernout & Hauspie's Korean unit, Joo Chul Seo, pledged $30 million of FLV's money as collateral for a loan "as a private individual," The Wall Street Journal reported. FLV, which has close ties to Lernout & Hauspie, said the collateral was pledged to Korea's Hanvit Bank, a customer of Lernout & Hauspie Korea, the paper said.

The agreement to provide the collateral was done at the instruction of an "irregularly" constituted board of directors of FLV Fund Korea, and without prior notification or permission from the parent in Belgium, the paper said. It isn't clear why Seo needed the money, Kegels was cited as saying.

Seo was suspended from the Korea unit by new chief executive John Duerden prior to FLV's announcement, an unnamed Lernout & Hauspie spokesman is cited as saying.

Lernout & Hauspie's Korean unit is at the center of a U.S. Securities and Exchange Commission inquiry. The unit recorded revenue of $127 million in the first six months of this year, up from just $1.2 million in 1999's first half, the paper said. The probe is focusing on the booking of Korean sales and Lernout & Hauspie's relationship with 30 start-up companies.

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