Exhibit 99.1  Medicsight PLC  Insights Limited   Report on value of shares
in Medicsight plc    9 January 2004   Intangible
  Business Limited
  
  www.intangiblebusiness.com  
   Medicsight Inc
  
  Strictly Private and ConfidentialShare Valuation
  
  9 January 2004  Contents   Sections   1
  Introduction
  and summary2
  Governing
  guidelines3
  Standard of
  Value4
  Rights
  of the shares5
  General Valuation
  Methodologies6
  Income approach
  methodologies used7
  Market approach
  methodologies used8
  Cost approach
  methodologies used9
  Chronology
  of events10
  Valuations of shares in
  MS-plc11
  Shares in
  Insights12
  Signed
  certification  
   List of appendices  1Intangible
Business credentials  2Explanation
of discount rate methodology  3Explanation
of terminal value methodology  4Discount
rate calculations  
   1Introduction and summary   Instructions  1.1We have
been asked by Medicsight, Inc (MS-Inc) to give our opinion on the value of
15,000,000 Medicsight plc (MS-plc) shares issued to MS-Inc in November 2001
and applied in settling an outstanding purchase consideration due to
Nightingale Technologies Limited (Nightingale).  Instructions  1.2The
author of this report is Thayne Forbes, who graduated in Mathematics from the
University of Oxford in 1982 and qualified as a Chartered Accountant with
Binder Hamlyn in 1986.  He initially
specialised on audit, accounting and business advisory services to owner
managed businesses, and by 1988 specialised in special advisory and
investigation projects, share and business valuations and litigation
support.  He became a member of the
Academy of Experts and the Society of Expert Witnesses in 1996.  1.3In
1997 Mr Forbes transferred as a senior manager to Arthur Andersen (Business
Consulting) where he continued providing litigation and valuation services, and
then developed a focus on intangible asset valuations.  For each of these service lines he was a
member of the senior team responsible for managing the practice areas.  Mr Forbes subsequently joined Brand Finance
plc as a brand valuation director in early 2000.  He has since passed a diploma at the Chartered Institute of
Marketing, and joined the Expert Witness Institute.  In early 2001 he left Brand Finance plc and co founded Intangible
Business Limited (www.intangiblebusiness.com) a consultancy specialising in
advising on intangible asset valuations and business development.  1.4Mr
Forbes professional work has usually been needed for a sale, dispute,
management information, reorganisation or for tax purposes.  For disputes he has generally acted as
expert witness and adviser for High Court proceedings, County Court
proceedings, arbitrations, other tribunals, expert determinations and
mediations.  He has also acted as the
expert for expert determinations, and is on the panel for expert determination
appointments by the President of the Institute of Chartered Accountants in
England and Wales.  He has given
evidence in court as expert witness and has attended court to give support and
advice to counsel.  He has also attended
mediations as expert witness.  1 
   1.5Mr
Forbes has managed over 100 valuation assignments and 50 litigation support
assignments of varying size and complexity. 
The following recent assignments give an indication of relevant
experience.  Valuation of
the global wine and spirits brands of a FTSE100 UK listed company, for
inclusion in its filing information under US GAAP supporting a successful
application to list its shares on the New York Stock Exchange.  Valuation of
intangible assets acquired by a travel company listed on NASDAQ for SEC filings
under US GAAP.  Expert advice,
to the international section of the New York branch of the US Internal Revenue
Service, on the contribution of business intangibles to the value of ancillary
sales for delivery services in the US, and on the commercial arrangements
behind sales distribution contracts for an entertainment group.  Evaluation of
the value of a patent for a space saving device for the apparel trade in North
America.  Evaluation of
the opportunities to a Charitable Memorial Fund (for an extremely well known
deceased celebrity) for licensing glassware, fine writing instruments, personal
stationery, holiday ornaments and diamond jewellery in North America.  Advice to the
US owner of a mobile telephone operator in the UK on its intangible operating
asset value for US tax purposes.  Advice to a
Yellow Pages group on UK, US and internet brand valuations for inter group
transfers prior to planned flotation.  Advice to the
target of a hostile takeover bid on the value of five of its brands in ladies
intimate apparel and fashion (in the UK and France) for inclusion in a day 39
defence document.  Strategic
advice on business development, fund raising and business/share sale for a
chain of ladies apparel shops in the UK.  Advice in
connection with the negotiation of the purchase of a childrens clothing brand
to a major UK retailer seeking to acquire the brand.  2 
   Advice to a
Japanese sports brand owner in dispute with a licensee in the UK over the terms
of the license for branded apparel in the UK.  Advice on the
value of intangible assets to a well known London retailer for use in
connection with competing hostile takeover bids.  Preparation of
a model to track brand and business value in test markets for the retail fuels
division of a major international oil company.  Advice to a
Norwegian client on intangible asset value for a digital broadcast equipment
business acquisition in the UK.  Advice to the
buyer of a national car and van rental company in the UK on breaches of
warranty on acquisition, and the resulting effect on the value of the business.  1.6The
overall credentials of Intangible Business are attached as appendix 1  Purpose of valuation work  1.7MS-Inc
requires this work to assess the value of these shares, which has already been
included in its annual report which has been filed with the Securities and
Exchange Commission as a form 10-K. 
Page 4 of this form 10-K identifies that the 15,000,000 shares were
issued on 22 November 2001 and valued at $21,832,000 based on the share
price of stock being placed on behalf of MS-plc during the period March to
December 2002.  1.8In
a letter dated 27 May 2003 BDO stated that in order to audit the fair value of
MS-plc shares, because the shares were not quoted on a securities exchange,
they took into account management representations, forecasted cashflows
prepared by management, and the price third parties were willing to pay for the
MS-plc shares.  The
shares to be valued  1.9The
shares to be valued were issued as the second tranche of an agreement between
MS-Inc and Nightingale dated 29 December 2000 for the acquisition of HTTP
Insights Limited (Insights).  3 
   1.10MS-Inc
prepares its accounts under US accounting standards, the relevant parts of
which are summarised in section 2 below. 
BDO confirmed that the key standard applying to this transaction is APB
16.  We have read this standard, and the
main paragraph which applies is paragraph 67:  ..  c.An asset acquired by issuing shares of stock of the
acquiring corporation is recorded at the fair value of the asset [An asset
acquired may be an entire entity which may have intangible assets, including
goodwill]  that is, shares of stock issued are recorded at the fair value of
the consideration received for the stock.  The
general principles must be supplemented to apply them in certain
transactions.  For example, the fair
value of an asset received for stock issued may not be reliably determinable,
or the fair value of an asset acquired in an exchange may be more reliably
determinable than the fair value of a noncash asset given up.  Restraints on measurement have led to the
practical rule that assets acquired for other than cash, including shares of
stock issued, should be stated at cost when they are acquired and cost may
be determined rather by the fair value of the consideration given or by the
fair value of the property acquired, whichever is the more clearly evident.  Cost in accounting often means the amount
at which an entity records an asset at the date it is acquired whatever its
manner of acquisition and that cost forms the basis for historical-cost
accounting.  1.11APB
16 also comments on the defects of the method which requires this (the purchase
method) on paragraphs 22 to 26. 
Paragraph 22 is particularly relevant:  22.However, the fair value of stock issued is not always
objectively determinable.  A market
price may not be available for a newly issued security or securities of a
closely held corporation.  Even an
available quoted market price may not always be a reliable indicator of fair
value of consideration received because the number of shares issued is relatively
large, the market for the security is thin, the stock price is volatile, or
other uncertainties influence the quoted price.  Further the determinable value of one security may not
necessarily indicate the fair value of another similar, but not identical,
security because their differences affect the value-for example the absence of
registration or an agreement which restricts a holders ability to sell a
security may significantly affect its value.  4 
   1.12Many
of these comments apply to the MS-plc shares being valued in this report.  They were newly issued shares and at
November 2001 there was no market for the shares.  Subsequently small parcels of shares were issued at £1 per
share.  These share issues were in an
extremely thin market with a relatively small number of transactions for small
parcels of shares at relatively low values (compared with the US and
international capital markets).  Standard
of value  1.13The
shares are to be valued on the basis of a fair value, as required by US accounting
standards.  Guidance on the meaning of
fair value is contained in section 3 below. 
In the context of this report fair value is taken as the amount at which
an asset (or liability) could be bought (or incurred) or sold (or settled) in a
current transaction between willing parties, that is, other than in a forced or
liquidation sale.  Date
of valuation  1.14The
shares are to be valued at 22 November 2001.  Rationale for valuation methods used  1.15There
are a number of valuation methodologies used in practice for valuing shares,
which are grouped under the income, cost and market headings.  We have considered these methodologies and
concluded that our valuations should be based on all of these approaches, but with
most emphasis on the income approach as it is the method most closely aligned
with the future economic benefits which are derived from ownership of the
shares.  Information,
analysis and reasoning  1.16The
information relied on has been a mixture of information maintained by MS-plc
and market research.  This has been
analysed to estimate the future economic returns generated by the shares as at
the point in time when the transaction occurred without recourse to hindsight.  The key information used has been discussed
and agreed with current Medicsight management.  Hindsight  1.17Some
of the information was produced after 22 November 2001.  To the extent practicable we have used
information which was available then. 
However in some instances we have used information prepared afterwards
for the following reasons:  a)It contains information
which was available at 22 November 2001.  5 
   b)Where it is impractical or
no longer possible (due to passage of time) to obtain contemporaneous
information we have used more current information reasonably consistent with
that we expect was available at 22 November 2001.  We have been careful not to rely on information which could not
have been available at 22 November 2001.  c)It contains information
which corroborates information which would have been available at 22 November
2001.  d)It contains information
about relevant events where it is better to know the information rather than
not to know and to guess at it.  Assumptions
and limiting conditions  1.18We
have also assumed that all relevant information has been made available to us
for this report and that the information can be relied on without verification.  Valuation
conclusion  1.19We
have concluded that a fair value of 15,000,000 shares in MS-plc (a 20.3%
shareholding) at 22 November 2001 was £750,000 in total or £0.05 per
share.  1.20The
underlying economic reality was that in November 2001 MS-plc was a new venture,
which had not demonstrated the ability to generate significant economic
value.  In these circumstances a valuer
should exercise caution before concluding that a minority holding of MS-plc
shares had significant value.  Disclaimer  1.21This
report has been prepared for MS-Inc solely for the purpose described in
paragraph 1.1 above.  It should not be
relied on for any other purpose nor should it be relied on by any other party
for any purpose whatsoever.  6 
   2Governing
guidelines   SEC
guidelines  2.1We
have carried out our valuations on the basis that the US Securities and
Exchange Commission will require as an overriding concept that the valuations
reflect underlying economic reality. 
Therefore the reality underlying the shares should be consistently
reflected in the share valuations.  US
accounting practice  2.2The
key US accounting standards governing the requirement for the share and
intangible asset valuations are as follows:  Accounting
Principles Board Opinion 16 - Business Combinations (APB 16)  Accounting
Principles Board Opinion 17 - Intangible Assets (APB 17)  Statement of
Financial Accounting Concepts No 5 - Recognition and Measurement in Financial
Statements of Business Enterprises  Statement of
Financial Accounting Concepts No. 7 - Using Cash Flow Information and Present
Value in Accounting Measurements  Statement of
Financial Accounting Standards No. 121 - Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of (FAS 121)  Statement of
Financial Accounting Standards No. 131 - Disclosures about Segments of an
Enterprise and Related Information (FAS 131)  Statement of
Financial Accounting Standards No. 141 - Business Combinations (FAS 141)  Statement of
Financial Accounting Standards No. 142 - Goodwill and Other Intangible Assets
(FAS 142)  Statement of
Financial Accounting Standards No. 144 - Accounting for the Impairment or
Disposal of Long-Lived Assets (FAS 144).  7 
   Uniform
Standards of Professional Appraisal Practice  2.3The
Appraisal Standards Board (part of The Appraisal Foundation, authorised by
Congress as the Source of Appraisal Standards and Appraiser Qualification) has
published Uniform Standards of Professional Appraisal Practice.  We have followed those standards in this
report.  Other
guidelines  2.4The
Internal Revenue Service in the US has issued guidelines for the valuations of
businesses and intangible assets. 
Although these guidelines do not directly govern this work we have
followed them in this valuation report to the extent they contain relevant
material.  2.5We
do not believe that the UK tax authorities have issued any guidelines for the
valuations of businesses and intangible assets.  The general requirement is for shares to be valued at market value,
which is broadly the same as the standard of value as the fair value as defined
in section 3 below).  2.6Whilst
we have followed the guidelines indicated by the US and UK tax authorities for
carrying out a valuation we cannot say whether our valuation approach will be
accepted by them or not.  In addition
the basis of valuation we have adopted may not be the appropriate one for some
tax circumstances.  8 
   3Standard
of Value   3.1It
is necessary to consider the standard of value, and its meaning.  Value can mean many different things to
different people in different circumstances. 
There should be no misunderstanding about the meaning of value in these
circumstances.  US
Accounting Standards  3.2US
accounting standards generally require the standard of value to be fair
value.  We set out below a discussion
of fair value contained in pages 32 and 33 of Valuing a Business  Fourth
Edition  The Analysis and Appraisal of Closely Held Companies by Shannon P.
Pratt, Robert F. Reilly and Robert P. Schweihs:To
understand what the expression fair value means, you have to know the context
of its use.  For certain bookkeeping
applications, fair value is defined in the relevant accounting literature.  In business valuation, the term fair value
is usually a legally created standard of value that applies to certain specific
transactions.  3.3There
is some guidance in FAS 141 (Appendix F) for the meaning of fair value:  The
amount at which an asset (or liability) could be bought (or incurred) or sold
(or settled) in a current transaction between willing parties, that is, other
than in a forced or liquidation sale.  Published
guidance  3.4This
tends to imply that the discussion of fair market value contained in pages 28
and 29 of Valuing a Business  Fourth Edition  The Analysis and Appraisal of
Closely Held Companies by Shannon P. Pratt, Robert F. Reilly and Robert P.
Schweihs is relevant to the standard of value which should be used:In the
United States, the most widely recognized and accepted standard of value
related to business valuations is fair market value.  With regard to business valuations, it is the standard that
applies to virtually all federal and state tax matters, such as estate taxes,
gift taxes, inheritance taxes, income taxes, and ad valorem taxes.  It is also the legal standard of value in
many other-though not all-valuation situations.  Fair market value is defined by the ASA as the amount
at which property would change hands between a willing seller and a willing
buyer when neither is acting under compulsion and both have reasonable
knowledge of the relevant facts  This
definition comports to that found in the Internal Revenue Code and Revenue
Ruling 59-60.  9 
   In most interpretations of fair market value, the
willing buyer and willing seller are hypothetical persons dealing at arms
length, rather than any particular buyer or seller.  In other words, a price would not be considered representative of
fair market value if influenced by special motivations not characteristic of a
typical buyer seller.  There is also general agreement that the definition
implies that the parties have the ability as well as the willingness to buy or
to sell.  The market in this definition
can be thought of as all the potential buyers and sellers of like businesses or
practices.  The concept of fair market value also assumes
prevalent economic and market conditions at the date of the particular
valuation.  You have probably heard
someone say I couldnt get anywhere near the value of my house if I put it on
the market today or, The value of XYZ Company stock is really much more (or
less) that the price its selling for on the New York Stock Exchange today.  The standard of value that those people have
in mind is some standard other than fair market value, since the concept of
fair market value means the price at which a transaction could be expected to
take place under conditions existing at the valuation date.  The terms market value and cash value are frequently
used interchangeably with the term fair market value.  The use of these essentially synonymous standard of value terms
is often influenced by the type of asset, property, or business interest
subject to valuation.  In the United States, the most widely recognized and
accepted standard of value related to real estate appraisals is market
value.  The Appraisal Foundation defines
market value as follows:  MARKET
VALUE:  Market value is the major focus
of most real property appraisal assignments. 
Both economic and legal definitions of market value have been developed
and refined.  A current economic
definition agreed upon by agencies that regulate federal financial institutions
in the United States of America is:  The
most probable price which a property should bring in a competition and open
market under all conditions requisite to a fair sale, the buyer and seller each
acting prudently and knowledgeably, and assuming the price is not affected by
undue stimulus.  Implicit in this
definition is the consummation of a sale as of a specified date and the passing
of title from seller to buyer under conditions whereby:  1.buyer and seller are typically motivated;  2.both parties are well informed or well advised, and
acting in what they consider their best interests;  3.a reasonable time is allowed for exposure in the open
market;  4.payment is made in terms of cash in United States
dollars or in terms of financial arrangements comparable thereto; and  10 
   5.the price represents the normal consideration for the
property sold unaffected by special or creative financing or sales concessions
granted by anyone associated with the sale.  Substitution
of another currency for United States dollars in fourth condition is
appropriate in other countries or in reports addressed to clients from other
countries.  Persons
performing appraisal services that may be subject to litigation are cautioned
to seek the exact legal definition of market value in the jurisdiction in which
the services are being performed.  The
most salient change in the above definition of market value compared with
definitions widely accepted a few years ago is the phrase the most probable
price in substitution for the highest price.  Conclusion  3.5In
the context of this report fair value is taken as the amount at which an
asset (or liability) could be bought (or incurred) or sold (or settled) in a
current transaction between willing parties, that is, other than in a forced or
liquidation sale.  11 
   4Rights
of the shares   General  4.1The
rights of the shares give rise to their value, and these rights are contained
in the Articles of Association of MS-plc. 
We have reviewed those articles and note that there is only one class of
shares, ordinary shares.  The rights of
the shares in MS-plc are reasonably typical and do not contain any terms which
would have an unusual effect on their value.  4.2The
15,000,000 MS-plc shares issued on 22 November 2001 then represented 20.3% of
the issued share capital, with the remaining shares held by one
shareholder.  Such a shareholding,
although substantial, would not have the ability to direct MS-plc strategy, direct
its resources or dividend policy.  In
other words it suffers from all the disadvantages of being a minority
interest.  In addition the shares of
MS-plc were not traded on any stock exchange and so they were not readily
marketable.  4.3Where
the rights of shares have disadvantages such as being a minority interest
and/or a lack of marketability then this needs to be reflected in their
value.  In practice this often leads to
discounts for such disadvantages.  12 
   5General Valuation Methodologies   General  5.1There
are three general approaches to quantifying value, summarised as follows:  Income (Income
Based) Approach - a general way of determining a value indication of a
business, business ownership interest, security, or intangible asset using one
or more methods that convert anticipated economic benefits into a present
single amount.  Market (Market
Based) Approach  a general way of determining a value indication of a
business, business ownership interest, security, or intangible asset using one
or more methods that compare the subject to similar businesses, business
ownership interests, securities, or intangible assets which have been sold.  Cost Approach 
a general way of determining a value indication of an individual asset by
quantifying the amount of money required to replace the future service
capability of that asset.  Income Approach  5.2The
income approach is based on anticipated future returns discounted back at some
appropriate discount rate to a present value. 
For shares and businesses there are a variety of income based
approaches.  In economic terms the value
of an asset is equal to the present value of the future returns which it is
projected to generate.  Market Approach  5.3The
market based approach is based on identifying comparable transactions in the
market and analysing key components or measures which drive or measure
value.  These can then be adjusted for
any differences in circumstances and can be applied to arrive at a valuation
based on market transactions.  5.4There
are also some aspects of the market approach that can be utilised in the income
approach.  Data obtained in the markets
might be used, for example, in arriving at sales forecasts, royalty rates and
discount rates.  13 
   Cost based approach  5.5There
are two aspects to cost:  historic cost;
and  replacement
cost.  5.6Historic
cost is not generally relevant as a share valuation methodology.  It can however give some background or
context to value, and might give information on a past market transaction (ie
cost might represent the historic exchange value of an asset in the market).  5.7Replacement
cost can be more directly relevant. 
Building a comparable asset can be a relevant consideration for a
buyer.  A buyer can always consider
building an asset as an alternative to buying it.  Appropriate methodology  5.8In
these circumstances, we have considered all approaches, however in our opinion
the income method gives the best basis for valuing these shares.  It incorporates elements from the market
based and cost based approaches and is therefore a rounded methodology.  Given that this is a minority interest it
should be primarily on a dividend yield basis as this method is directly
aligned with the economic rights of the shares and how they could and would be
exploited for value by an investor. 
Other income based approaches, discounted cash flow, multiples of sales
and profits and relief from royalty will also be used as cross checks.  5.9We
also regard market transactions of some relevance, and have looked for properly
comparable transactions as a means of quantifying the value of the shares.  Such information is difficult to obtain
because it is not generally made available by the parties to the transaction
for a variety of reasons.  5.10In
our view historic cost is of background relevance.  What has been paid to develop an asset should be influential to a
buyer, although in these circumstances obtaining this information is not
practicable or cost effective.  We
consider replacement cost to be more relevant, as a buyer can look to the cost
of building equivalent investments rather than buying them.  14 
   6Income approach methodologies used   Methodologies
used  6.1We
consider the following income based methodologies to be the most relevant in
these circumstances:  Gross dividend
yield;  Discounted cash
flow;  Multiples of
annual profits or sales; and  Relief from
royalty.  Gross dividend
yield  6.2The
gross dividend yield method is based on forecast future gross dividends which
the shareholder would anticipate for the shareholding.  These are then discounted to a present value
using a required rate of return or gross dividend yield.  Discounted cash flow  6.3The
discounted cash flow method is based on forecast free cash flows for MS-plc as
a whole.  These are then discounted to a
present value using a required rate of return or discount rate.  This value can then be attributed to the
shareholding after adjusting for further relevant factors such as for the
disadvantages of a minority interest and lack of marketability.  6.4Two
specific areas of the discounted cash flow method, the discount rate and the
terminal value calculation are explained in appendices 2 and 3 respectively.  Multiples of annual profits or
sales  6.5The
multiples method estimates the future maintainable annual profits or sales and
applies a multiple in order to arrive at a value.  It has the advantage that some comparison is possible both
internally and externally with other valuations or transactions.  The main disadvantages lie with the method
being too simplistic and the usual inability to obtain sufficiently meaningful
information for comparison.  Relief from royalty  6.6As the value of the company lies predominantly in
its intellectual property then the value of shares can be estimated by valuing
the intellectual property itself. 
Valuing the intellectual property would be primarily on the relief from
royalty method, which  15 
   estimates the future royalties which the
owner is relieved from paying by virtue of owning the intellectual
property.  The costs associated with
owning the intellectual property are also estimated together with tax on the
net profits.  The net returns are then
discounted to a value using a discount rate which reflects both the time value
of money and the risk associated with the cash flows.  6.7The relief from royalty method has the advantage
that it is the method most closely aligned with licensing, which is a usual
form of practical exploitation of pure intellectual property.  This allows for practical sense checks and
comparisons, and minimises confusion with other issues impacting on business
returns together with the intellectual property.  It has become the most mainstream method for valuing intellectual
property in practice.  6.8Once the intellectual property has been valued, it
can then be combined with the value of the other assets and liabilities in the
company to give a value of the company itself. 
This value can then be attributed to the shareholding after adjusting
for further relevant factors such as for the disadvantages of a minority
interest and lack of marketability.  16 
   7Market approach methodologies used   Information  7.1For
these shares there are severe limitations on the availability of directly
relevant market information.  We have
however looked for market information which is as comparable as possible to the
shares being valued.  Basis
of comparison  7.2The
best available measures for using market data for this valuation are:  Transactions in
MS-plc shares  Transactions in
MS-Inc shares  Listed company
share prices  Unlisted
company transactions  7.3Comparisons
are often carried out by using ratios or multiples such as:  By reference to
a multiple of sales - sales times multiple equals value  By reference to
a multiple of Earnings Before Interest and Tax (EBIT) - EBIT times multiple
equals value  By reference to
a multiple of Earnings Before Interest and Tax Depreciation and Amortization
(EBITDA) - EBITDA times multiple equals value  By reference to
a price earnings ratio  earnings per share times P/E ratio equals value per
share.  17 
   8Cost approach methodologies used   Use of cost approach  8.1The
two potential ways of estimating costs in these circumstances are:  The historic
cost of establishing the shares.  The anticipated
cost of replacing the shares, or building new comparable shares.  8.2The
rationale for this is that a potential buyer of the shares may look to these
either as a consideration or as an alternative when making such an
investment.  Both of these are not
particularly realistic considerations in these circumstances.  8.3Also
the values in the balance sheet of a company are generally at cost, and this
may have some relevance to share value. 
However the cost of an asset may not be its value and a minority
shareholder has no access to or control over the use of assets owned by the
company so it has limited application.  8.4So
whilst we have referred to certain cost aspects, it is not particularly relevant
to this valuation.  18 
   9Chronology
of events   9.1In
this section we summarise a chronology of relevant events.  29 December 2000 Share Sale
Agreement between Nightingale and MS-Inc  9.2Consideration
stated as 30 million (15 million before 2 for 1 share split) MS-Inc
shares.  No reference was made to value,
only to the quantities of shares to be issued in consideration.  9.3Consideration
payable as follows:  15m once DERA
validation report satisfactory  15m upon first
trial in medical imaging or DERA report on commercial viability of same  Incorporation of MS-plc  9.4MS-plc
was incorporated in August 2001.  9 November 2001 minutes of
MS-plc  9.5Board
resolves to acquire part of Insights business for £3,659,104, financed by the
assumption of a matching indebtedness due to MS-Inc.  9.6Board
resolves to increase its authorised share capital and sub divide its shares
into 5p shares.  Minutes of MS-Inc 22 November 2001  9.7Board
approves the sale of part of Insights business by Insights to MS-plc, with
MS-plc assuming liability due by Insights to MS-Inc, (being £3.65m and
equivalent to the valuation placed on the assets acquired) as consideration for
the business acquired.  9.8Board
agrees novation of £3.65m debt from Insights to MS-plc.  9.9Board
approves resolutions by MS-plc to increase its authorised share capital and sub
divide shares into 5p shares.  9.10Board
notes MS-plc will repay the £3,659,104 loan by issuing 72,868,582 new 5p shares
(resulting in a small share premium of £15,674.90) and resolves to request
MS-plc to issue 15,000,000 of these in the name of Nightingale Technologies
Limited in order to satisfy MS-Incs final obligation under the 29 December
2000 agreement (as renegotiated in November 2001).  19 
   9.11MS-Inc
resolves to apply for further 1m shares in MS-plc at 5p each  subscribing
£50,000 in cash.  22 November 2001letter from MS-Inc to Nightingale  9.12Records
the countersigned agreement of Nightingale to accept a variation to the 29December
2000 agreement, substituting 15m MS-plc shares in lieu of 15m Inc shares.  Minutes of MS-plc dated 22
November 2001  9.13Capitalisation
of £3.65m debt due to MS-Inc by issue of 57,868,582 shares and, at specific
request of MS-Inc., 15m in the name of Nightingale.  9.14MS-Inc
subscription of £50,000 cash for 1m fully paid 5p shares  9.15Allotment
and issue of 73,868,582 shares credited as fully paid at a price of 5p each.  15 February 2002 Underwriting
Agreement between Asia IT Capital and MS-plc  9.16Underwriting
Agreement for allotment
of shares to subscribers for £1 each, closing date 31 December 2002  to
be accepted within 21 days (i.e. 8 March 2002).  Share issues  9.17Issues
of shares in MS-plc are summarised below:  Amount paidDate
  
  Number
  
  Nominal
  value
  
  per
  share
  
  total09/08/01
  
  20
  
  0.05
  
  0.05
  
  122/11/01
  
  57,868,582
  
  0.05
  
  0.05
  
  2,893,429
  
  78.3
  %22/11/01
  
  1,000,000
  
  0.05
  
  0.05
  
  50,000
  
  1.4
  %22/11/01
  
  15,000,000
  
  0.05
  
  0.05
  
  750,000
  
  20.3
  %Total
  
  73,868,602
  
  
  
  
  
  3,693,430
  
  100.0
  %14/08/02 -15/02/03
  
  7,126,418
  
  0.05
  
  1.00
  
  7,126,418
  (1)Total
  
  80,995,020
  
  
  
  
  
  14,513,277  
 (1)  In small parcels of shares of up to
250,000 shares  20 
   10Valuations of shares in MS-plc  10.1We have carried out several alternative
valuations of shares in MS-plc on an income basis, which we use for comparison
and cross checking.  10.2We calculated a value on a gross dividend yield basis, which anticipates the future gross
dividends attributable to the shares. 
This is the method most closely aligned with the rights of the shares, and
is summarised as follows:  Required
  dividend yield
  
  10.00
  %Tax rate
  for grossing up dividends
  
  10.0
  %Dividend
  cover
  
  4.0
  %New product
  probability of success
  
  10.0
  %Dividend
  growth rate 2005 to 2007
  
  238.81
  %Dividend
  growth rate after 2007
  
  4.0
  %  2002
  
  2003
  
  2004
  
  2005
  
  2006
  
  2007Revenue £m
  
  0.000
  
  6.080
  
  20.060
  
  37.210
  
  47.530
  
  52.120Operating costs
  
  0.000
  
  (1.730
  )
  (4.440
  )
  (6.620
  )
  (7.010
  )
  (7.140
  )Gross profit
  
  0.000
  
  4.350
  
  15.620
  
  30.590
  
  40.520
  
  44.980Discount to more realistic levels
  50.0%
  
  0.000
  
  (2.175
  )
  (7.810
  )
  (15.295
  )
  (20.260
  )
  (22.490
  )Adjusted gross profit
  
  0.000
  
  2.175
  
  7.810
  
  15.295
  
  20.260
  
  22.490Overheads
  
  (2.000
  )
  (4.210
  )
  (4.670
  )
  (4.890
  )
  (5.070
  )
  (5.190
  )EBITDA
  
  (2.000
  )
  (2.035
  )
  3.140
  
  10.405
  
  15.190
  
  17.300Amortisation and depreciation
  
  (0.500
  )
  (1.000
  )
  (1.210
  )
  (1.610
  )
  (1.940
  )
  (2.000
  )EBIT
  
  (2.500
  )
  (3.035
  )
  1.930
  
  8.795
  
  13.250
  
  15.300Interest receivable/(payable)
  
  0.000
  
  0.000
  
  0.000
  
  0.000
  
  0.000
  
  0.000Profit before taxation
  
  (2.500
  )
  (3.035
  )
  1.930
  
  8.795
  
  13.250
  
  15.300Taxation
  
  
  
  
  
  0.000
  
  (1.557
  )
  (3.975
  )
  (4.590
  )Profit after taxation £m
  
  (2.500
  )
  (3.035
  )
  1.930
  
  7.238
  
  9.275
  
  10.710Retained profits/(losses) brought forward
  
  (2.700
  )
  (5.200
  )
  (8.235
  )
  (6.305
  )
  0.933
  
  10.208Retained profits/(losses) carried forward
  
  (5.200
  )
  (8.235
  )
  (6.305
  )
  0.933
  
  10.208
  
  20.918Dividend cover
  
  
  
  
  
  
  
  4.0
  
  4.0
  
  4.0Net dividend
  
  
  
  
  
  
  
  0.233
  
  2.319
  
  2.678Shares in issue (m)
  
  80.995
  
  80.995
  
  80.995
  
  80.995
  
  80.995
  
  80.995Net dividend per share
  
  0.000
  
  0.000
  
  0.000
  
  0.003
  
  0.029
  
  0.033Gross dividend per share £
  
  0.000
  
  0.000
  
  0.000
  
  0.003
  
  0.032
  
  0.037Discount Factor
  
  1.100
  
  1.210
  
  1.331
  
  1.464
  
  1.611
  
  1.772Present value per share £
  
  0.000
  
  0.000
  
  0.000
  
  0.002
  
  0.020
  
  0.021  VALUE CALCULATION
  
  £Value as % of 2007
  profit after tax
  
  3.0
  
  
  
  Value per share to 2007
  
  0.04Value as multiple
  of 2007 sales
  
  1.2
  
  
  
  Value per share after 2007
  
  0.36Total value per share
  
  0.40New product probability of success
  
  10
  %Probability weighted value per
  share
  
  0.040  21 
   10.3We
have also estimated a value of the companys business, and attributed it to the
underlying shares.  Although this is not
directly in accordance with the share rights it gives some useful insight and
comparison, summarised as follows:  Discount
  rate
  
  10.53
  %New
  product probability of success
  
  10.0
  %Free
  cash flow growth rate 2005 to 2007
  
  29.22
  %Profit
  growth rate after 2007
  
  4.0
  %  2002
  
  2003
  
  2004
  
  2005
  
  2006
  
  2007Revenue £m
  
  0.000
  
  6.080
  
  20.060
  
  37.210
  
  47.530
  
  52.120Operating costs
  
  0.000
  
  (1.730
  )
  (4.440
  )
  (6.620
  )
  (7.010
  )
  (7.140
  )Gross profit
  
  0.000
  
  4.350
  
  15.620
  
  30.590
  
  40.520
  
  44.980Discount to more realistic levels
  50.0%
  
  0.000
  
  (2.175
  )
  (7.810
  )
  (15.295
  )
  (20.260
  )
  (22.490
  )Adjusted gross profit
  
  0.000
  
  2.175
  
  7.810
  
  15.295
  
  20.260
  
  22.490Overheads
  
  (2.000
  )
  (4.210
  )
  (4.670
  )
  (4.890
  )
  (5.070
  )
  (5.190
  )EBITDA
  
  (2.000
  )
  (2.035
  )
  3.140
  
  10.405
  
  15.190
  
  17.300Capital expenditure
  
  (0.500
  )
  (1.910
  )
  (1.830
  )
  (1.500
  )
  (1.500
  )
  (1.500
  )Working capital movement
  
  
  
  (0.544
  )
  (1.409
  )
  (2.415
  )
  (2.650
  )
  (2.973
  )Operating cash flow
  
  (2.500
  )
  (4.489
  )
  (0.099
  )
  6.490
  
  11.040
  
  12.828Interest receivable/(payable)
  
  0.000
  
  0.000
  
  0.000
  
  0.000
  
  0.000
  
  0.000(2.500
  )
  (4.489
  )
  (0.099
  )
  6.490
  
  11.040
  
  12.828Taxation
  
  
  
  
  
  0.000
  
  (1.557
  )
  (3.975
  )
  (4.590
  )Free cash flow
  
  (2.500
  )
  (4.489
  )
  (0.099
  )
  4.933
  
  7.065
  
  8.238Discount Factor
  
  1.105
  
  1.222
  
  1.350
  
  1.493
  
  1.650
  
  1.824Present value £m
  
  (2.262
  )
  (3.674
  )
  (0.073
  )
  3.305
  
  4.282
  
  4.517  VALUE CALCULATION
  
  
  
  £mValue as multiple
  of 2007 EBITDA
  
  4.5
  
  
  
  Value of business to 2007
  
  
  
  6.1Value as multiple
  of 2007 sales
  
  3.0
  
  
  
  Value of business after 2007
  
  
  
  71.9Total value of business
  
  
  
  78.0New product probability of success
  
  
  
  10.0
  %Probability weighted value
  
  
  
  7.8Percentage shareholding
  
  20.3
  %
  1.6Discount for marketability etc
  
  50.0
  %
  (0.8
  )Value of shareholding
  
  
  
  0.8Number of shares
  
  
  
  15,000,000Value per share
  
  
  
  £
  0.053  22 
   10.4We
have also calculated a share value based on valuing the companys assets, which
is principally intellectual property. 
Again, although this is not directly in accordance with the share rights
it also gives some useful insight and comparison, summarised as follows:  Discount
  Rate
  
  10.53
  %Tax
  Rate
  
  30.00
  %Royalty
  per scan
  
  £
  50Profit
  growth rate 2005 to 2007
  
  154.04
  %Profit
  growth rate after 2007
  
  4.00
  %  2002
  
  2003
  
  2004
  
  2005
  
  2006
  
  2007Total scans per year
  
  0.000
  
  11,832
  
  41,904
  
  77,712
  
  99,264
  
  108,864Discounted to more realistic levels
  50.0%
  
  0.000
  
  (5,916
  )
  (20,952
  )
  (38,856
  )
  (49,632
  )
  (54,432
  )Revised total scans per year
  
  0
  
  5,916
  
  20,952
  
  38,856
  
  49,632
  
  54,432Royalty per scan £
  
  50
  
  50
  
  50
  
  50
  
  50
  
  50Royalties £m
  
  0.000
  
  0.296
  
  1.048
  
  1.943
  
  2.482
  
  2.722Overheads
  
  (1.800
  )
  (1.800
  )
  (1.800
  )
  (1.800
  )
  (1.800
  )
  (1.800
  )Operating Profit
  
  (1.800
  )
  (1.504
  )
  (0.752
  )
  0.143
  
  0.682
  
  0.922Taxation
  
  0.540
  
  0.451
  
  0.226
  
  (0.043
  )
  (0.204
  )
  (0.276
  )Profit after tax
  
  (1.260
  )
  (1.053
  )
  (0.527
  )
  0.100
  
  0.477
  
  0.645Discount Factor
  
  1.105
  
  1.222
  
  1.350
  
  1.493
  
  1.650
  
  1.824Present Value £m
  
  (1.140
  )
  (0.862
  )
  (0.390
  )
  0.067
  
  0.289
  
  0.354  VALUE CALCULATION
  
  
  
  £mValue as multiple
  of 2007 royalties
  
  1.5
  
  
  
  Value of IP to 2007
  
  
  
  (1.682
  )Value as multiple
  of 2007 profit after tax
  
  6.1
  
  
  
  Value of IP after 2007
  
  
  
  5.630Total value of IP
  
  
  
  3.949New product probability of success
  
  
  
  10.0
  %Probability weighted value
  
  
  
  0.395Percentage shareholding
  
  20.3
  %
  0.080Discount for marketability etc
  
  50.0
  %
  (0.040
  )Value of shareholding
  
  
  
  0.040Number of shares
  
  
  
  15,000,000Value per share
  
  
  
  £
  0.003  MS-plc forecasts  10.5Our
valuation calculations are based on forecasts prepared by MS-plc.  It is apparent that these are highly
optimistic, not least as no income was developed to the end of 2002 and in 2003
about £500,000 was forecast for that year. 
Therefore these forecasts of substantial income need to be treated with
caution for a valuation.  23 
   Market Methodology  10.6The
shares were issued by MS-plc at 5p per share on 22 November 2001 and used for
this transaction immediately afterwards.  10.7MS-plc
shares were issued to repay debt of amounting to 5p a share on 22 November
2001.  10.8MS-plc
converted to a plc on the audited balance sheet with £3.7m total share capital
at (5p a share) on 22 November 2001.  10.9Subsequent
transactions in MS-plc shares were at £1 per share.  However the following points should be noted:  The
transactions were some time after the valuation date of November 2001.  The
transactions were only small parcels, of shares, much less than 15m.  The transactions
were required for a level of finance which actually took some 10 months to
raise.  Of the finance
required, £4.9m was raised in total, which was only 80% of target.  The investments
were relatively small amounts, for small parcels of shares.  Many investors
committed on basis that their investment was eligible for EIS (20% against
Income Tax plus up to 40% relief from rolling Capital Gains).  10.10MS-Incs OTC
trading prices may be taken to imply a value for MS-plc shares.  However:  Insights
retained the rights for uses other than medical but MS-plc did not (MS-plc only
had the rights for medical use).  The value of
MS-plc in 2003 does not support £1 a share, and there has been value
improvement since November 2001 (eg the work of the team of software engineers
engaged since November 2001).  24 
   The share price
was driven by market perceptions rather than reality.  10.11We
have obtained data on share prices for listed and unlisted companies around
November 2001.  MS-plcs main
competitors at the time were GE, Phillips, Siemens and Toshiba, but this was an
insignificant part of their business and not possible to analyse separately.  We have researched some comparable public
information.  Although it is not
particularly comparable it is comparable as anything which can be practicably
obtained from published information. 
The data is consistent with our principal valuation methods and is
summarised:  BDO Stoy
Hayward/Acquisitions Monthly Private Company Index showing a private company
index P/E ratio of 12.6 for Q3 2001 against the four month average FT
Non-Financials P/E ratio of 21.1.  FTSE-Actuaries
Indices showing a P/E ratio of 42.9 and Net Yield of .9% for Software and
Computer Services October  December 2001.  Cost
Methodology  10.12At
22 November 2001 the balance sheet of MS-plc had net assets of £3,693,429 after
including book values of £3.5m for intangibles.  Overall
assessment  10.13By
November 2001 MS-plc had not generated any revenue, and little real prospect of
substantial sales within the short to medium term.  Indeed it has only generated modest amounts of sales by
2003.  Based on historic performance
shareholders had no prospects of dividends or realisations from a share
sale.  This gives an expectation that
shares would only have a nominal value unless there is strong evidence about
how value would be derived.  We have not
seen any such evidence.  10.14The
four different income approaches are all consistent with this, as is the cost
approach.  The only approach which
indicates the possibility of a higher value are some market transactions.  There are however good reasons to discount
them in this instance.  It is therefore
reasonable to conclude that a fair value of shares in MS-plc at November 2001
was their nominal value of 5p per share.  25 
   11Shares
in Insights  Objective  11.1To
summarise all relevant valuation approaches for 1,000 shares in Insights (50%)
at November 2001.  Income
Methodology  11.2No
business plans were ever developed for Insights, there was just a market
study.  Valuation calculations based on
distinct income forecasts for Insights are therefore not possible.  11.3In
the event Insights generated no income other than through the sale of its
rights.  Market
Methodology  11.4The
first part of the same transaction was valued at US$93,000,000 for 50%.  With regard to this:  By November
2001 the perceived value of the intellectual property had decreased  It needed to be
combined with MS-plc intellectual property which had yet to be developed  The condition
for the second tranche was not then satisfied, and there was no clear timetable
or resources needed to achieve it  The condition
would perhaps only be fulfilled after clinical trials were finished, and the
results evaluated it as fit for purpose. 
These trials had still not yet started even by end 2003  The negotiating
position of Nightingale was weak on the second tranche  The perception
then by Nightingale, Medicsight Inc and MS-plc was of a token value at 5p per
share  11.5The
assets were subsequently sold, £3.6m for the medical use intellectual property
to MS-plc and £1.5m for the remaining intellectual property to Medicsight
Finance Limited, plus the transfer of loan from Nightingale of $3.25m (also
included was a  26 
   rent deposit and a patent).  No
work was carried out on any other application of this intellectual
property.  Then Insights was sold for
the nominal sum of £100.  Cost
Methodology  11.6At
31 December 2001 the balance sheet of Insights had net liabilities of
£4,031,092, after including book values of £1.7m for intangible assets.  Overall
assessment  11.7By
November 2001 Insights had not generated any profits, and had only generated
modest amounts of sales.  Based on
historic performance shareholders had no prospects of dividends or realisations
from a share sale.  This gives an
expectation that shares would only have a nominal value unless there strong
evidence about how value would be derived. 
We have not seen any such evidence.  11.8Taking
all the factors together, and considering the reasons for certain
inconsistencies it is reasonable to conclude that a fair value for 15,000,000
shares in MS-plc at November 2001 was £750,000 or 5p per share.  27 
   12Signed
certification  12.1I
certify to the best of our knowledge and belief:  the
statements of fact contained in this report are true and correct;  the
reported analyses, opinions, and conclusions are limited only by the reported
assumptions and limiting conditions, and are my personal, impartial, unbiased
professional analyses, opinions, and conclusions;  I
have no present or prospective interest in the property that is the subject of
this report, and I have no personal interest with respect to the parties
involved;  I
have no bias with respect to the property that is the subject of this report or
to the parties involved with this assignment;  my
engagement in this assignment was not contingent upon developing or reporting
predetermined results;  my
compensation for completing this assignment is not contingent upon the
development or reporting of a predetermined value or direction in value that
favours the cause of the client, the amount of the value opinion, the
attainment of a stipulated result, or the occurrence of a subsequent event
directly related to the intended use of this appraisal;  my
analyses, opinions, and conclusions were developed, and this report has been
prepared in conformity with the Uniform Standards of Professional Appraisal Practice;
and  significant
professional assistance to the person signing this report was only provided by
representatives of Intangible Business Limited.   SignedThayne ForbesIntangible Business Limited  28 
   Appendix 1  Our
people  
   Key people   Senior
  ConsultantsStuart
  WhitwellThayne
  ForbesCharles
  Langford      Tracey McCulloch      Elise
  Neils (USA)Senior AssociatesEdmond
  Huysser (Holland)Sheila
  Searle (USA)Malcolm
  Davis (Japan)Patrick
  Gillon (Spain)Philippa
  KelhamDavid
  KelhamSam
  Dias (UK - econometrician)Peter
  Gibson (Italy)Rick
  Gilewicz (Latin America)Keith
  LucasRobert
  Needham (CIS and Baltics)  
   Thayne Forbes  Thayne read Mathematics at Oxford University before
qualifying as a Chartered Accountant with Binder Hamlyn in London in 1986.  He has since passed the Intensive Diploma at
the Chartered Institute of Marketing Exams to gain dual Chartered status. He is
also a member of The Academy of Experts, The Society of Expert Witnesses, and
The Institute of Expert Witnesses.  Thayne worked for Arthur Andersen for six years,
and then at Brand Finance for a year, prior to becoming a founder shareholder
director of Intangible Business Limited. 
Whilst at Arthur Andersen, Thayne was one of the key intellectual
property specialists in the UK practice, for example he was the UK
representative on the global steering committee responsible for developing
international training and best practice in valuations.  Thaynes strategy and valuation work has covered
brands, other intangible assets, businesses and shares.  He has carried out over 100 such advisory
projects over the last 15 years.  These
have been required across a wide range of industry sectors both in the UK and
international markets for a variety of business reasons, such as brand
strategy, sale or purchase and business re-organisation.  Thayne has managed and worked on a wide variety of
brand strategy/valuation projects including postal services, watches,
pharmaceuticals, media, banking, fashion, petroleum and lubricants, facial and
toilet tissue, ingredient brands, celebrities and many others  
   Stuart Whitwell  Stuart graduated from Plymouth University in
Business Studies and trained in sales operations in Unilevers MacFisheries
subsidiary before qualifying as a Chartered Management Accountant with Reed
International in 1985.  He has also
undertaken the final examinations of the Chartered Institute of Marketing in
order to achieve dual Chartered status. 
He is also a member of the Marketing Society  He worked for Brown and Root (2 years), Sea-Land (2
years), and Hiram Walker International (for 10 years) in Europe and Asia
Pacific having specialised in brand market business development projects in
Europe and Asia.  He held various senior
positions in Finance, Business Development and General Management during this
period holding the position of Regional Director of Finance and Business
Development for Asia Pacific, and was responsible for many successful
acquisitions, joint ventures and new brand/market developments  For two years Stuart ran his own consulting company
in Hong Kong undertaking market and business development projects for
Brown-Forman, Pernod Ricard and Jose Estevez S.A. in China and the
Philippines.  During this period Stuart
successfully launched three new to market brands and implemented successfully a
new independent sales and marketing distribution company.  Stuart has managed and worked on a wide range of
brand strategy/valuation projects including clients in media, telecoms,
petroleum and lubricants, utilities, logistics, electronics, retail, banking,
postal services, building products, logistics, ingredient brands, celebrities,
fashion, beverages, facial and toilet tissue and furniture retailing.  
   Elise Neils  Elise is based in the US and specialises in
providing valuation services to businesses, governmental entities, attorneys,
and accountants.  Over the past fourteen
years, Elise has supervised and participated in hundreds of complex valuation assignments
involving intangible assets, businesses, brand names, software, real estate,
sports franchises and hard assets.  Elise has a Juris Doctor from Marquette University
Law School and a Bachelor of Business Administration in Finance from the
University of Wisconsin - Milwaukee. She has successfully passed the American
Society of Appraisers Business Valuation Advancement Examination and is a
licensed member of the State Bar of Wisconsin; a Member of the National
Association of Securities Dealers Board of Arbitrators; and a member of the Alumni
Board of Directors of the National Sports Law Institute.  Most recently Elise testified at an SEC hearing on
auditor independence at Pace University in New York City and spoke to sports
and entertainment lawyers on the Valuation of Stadium Naming Rights.  Elise has worked on many Intangible Business
assignments most notably in wines and spirits, quick service restaurants and
ingredient brands  
   Tracey McCulloch  Tracey studied Business Marketing at the Queensland
University of Technology in Australia. 
She spent four years working in a variety of marketing and
communications roles before pursuing her ambition in 1994 to travel and work in
the UK marketing industry. She started life in London with leading UK design
and brand consultancy Tutsells Lambie-Nairn. Whilst working there, she
discovered her passion for brands, and after a year, joined the Leo Burnett
Brand Consultancy unit.  She spent over
two years with LBBC working with global clients on brand architecture, brand
positioning, internal brand management and strategy projects.  In 1998, she embarked on the brand valuation
path, joining Brand Finance where she worked for over three years on many
successful, brand valuation and strategy projects for global clients.  Tracey joined Intangible Business in September
2001, keen to pursue her interest in the exciting field of brand valuation and
strategy, and has since worked on projects for brands such as The Woolmark,
Allied Domecq Spirits & Wines, Princess Diana of Wales Memorial Fund and The
Glasshouse Fashion chain.  
   Charles Langford  Charles background is entirely within the field of
Brand Valuation having worked on projects across most business sectors which
have allowed him to appreciate all the different methodologies and approaches
to brand valuation and respective application  Charles specialist expertise is the ability to
develop bespoke brand valuation models that reflect the defined understanding
and linkage between relative consumer equity and market performance and the ability
of a business to convert this to financial performance through operational
efficiency  Charles has worked on a range of brand valuation
projects with Intangible Business including wines and spirits, quick service
restaurants, fabrics, fashion and ingredient brands  
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   Appendix 2  Discount
Rate  1.1A
discount rate is an annually compounded rate by which each increment of
expected economic income is discounted back to its present value.  A discount rate reflects both time value of
money and risk, and therefore represents the cost of capital.  1.2For
purposes of this report, the terms discount rate, cost of capital, and
weighted average cost of capital (WACC) are used interchangeably.  1.3According
to Dr. Alfred Rappaport in his 1998 edition of Creating Shareholder Value,  The appropriate rate for
discounting the companys cash flow stream is the weighted average costs of
debt and equity capitalIt is important to emphasize that the relative weights
attached to debt and equity, respectively, are neither predicated on dollars
the firm has raised in the past, nor do they constitute the relative
proportions of dollars the firm plans to raise in the current year.  Instead, the relevant weights should be
based on the proportions of debt and equity that the firm targets for its
capital structure over the long-term planning period.  1.4The discount rate was computed as a WACC rate based on the following
formula:  WACC = (ke
* We) + (kp * Wp) + (kd[1-t] * Wd)
+/- y   Where:   WACC=  Weighted Average Cost of
Capital  ke=  Cost of common equity
capital  We=  Percentage of common
equity in the capital structure, at market value  kp=  Cost of preferred equity  Wp=  Percentage of preferred
equity in the capital structure,  
   at market value  kd=  Cost debt (pre-tax)  t=  Tax rate  Wd=  Percentage of debt in the capital structure, at market value  y=  Specific risk factor adjustment  1.5In
summary, the WACC rate has several attributes, including:  It is
market driven i.e., it is the expected rate of return that the market requires
to commit capital to the investment in the shares. It is
forward-looking, based on expected returns. The
base against which cost of capital is measured is market value, not book value. It is
measured in nominal terms, including expected inflation.  Cost of Equity  1.6In
developing the cost of equity, we used the build up model based on the CAPM:  E= Rf + b(ERP)  E= Cost of Equity Rf= Risk-free Rate b= Beta ERP= Equity risk premium  Risk Free Rate  1.7The
CAPM implicitly assumes the presence of a single riskless asset, that is, an
asset perceived by all investors as having no risk.  The risk free rate is the return available as of the valuation
date on a security that the market generally regards as being free of the risk
of default.  A common choice for the
nominal riskless rate is the yield on a government security.  While interest rate changes cause government
obligations to fluctuate in price, investors face essentially no default risk
as to either coupon payment or return of principal.  1.8The
risk-free rate reflects the following components:  
   A real
return for lending out the funds over the investment period, thus forgoing consumption
for which the funds otherwise could be used. The
expected rate of inflation over the term of the risk-free investment. The
risk that the principals market value will rise or fall during the period to
maturity as a function of changes in the general level of interest rates.  1.9In
our analysis, we utilized the CSFB Equity-Gilt Study, 15 year gilt index for
the risk free rate.  Beta  1.10Beta
is a measure of an assets sensitivity to the market, otherwise known as
systematic risk.  The systematic risk of
a security is estimated by regressing the securitys excess returns against the
market portfolios excess returns.  The
slope of the regression equation is the beta. 
Beta is a function of the relationship between the return on an
individual security and return on the market as measured by a broad market
index.  Equity Risk Premium  1.11The
equity risk premium (ERP) represents the additional return an investor
expects to compensate for the additional risk associated with investing in
equities as opposed to investing in a riskless asset.  The ERP is reflective of what an investor thinks the risk premium
is going forward.  Unfortunately, the
expected ERP is unobservable in the market and therefore must be estimated
through the use of historical data.  The
historical equity risk premium is calculated by subtracting the long-term
average of the income return on the riskless asset from the long-term average
stock market return as measure over the same period as that of the riskless
asset.  This assumes that what has
happened in the past in representative of what might be expected in the future.  Cost of Debt  1.12The
other capital used to estimate a discount rate is debt, the cost of which is
typically based on interest rates  
   Tax rates  1.13The
discount rate is based on the cash flows after tax, and should therefore be
adjusted for tax to match the cash flows. 
Typically there is no adjustment to the cost of equity but there is an
adjustment to the cost of debt.  Weighting of Equity and Debt  1.14The
discount rate should reflect an appropriate capital structure of equity and
debt and so the cost of equity and the cost of debt should be weighted to give
a WACC.  
   Appendix 3  Terminal
value methodology  1.1For
purposes of this report, the terms terminal value, continuing value, and
perpetuity value are used interchangeably. 
The terminal value is an estimate of the present value of the future
cash flows from the explicit forecast period.  1.2Estimating
the terminal value or continuing value parameters is an integral part of the
forecasting process.  The continuing
value parameters should reflect a coherent forecast for the long-term economic
situation of the industry. 
Specifically, the continuing value parameters are based on the expected
hypothetical steady state condition for the shares.  This has been applied by assuming a steady percentage increase
after 2007 and using Gordons growth model to calculate a present value for
this.  
   Appendix 4  Required Dividend YieldNet Yield
  of listed companies
  
  0.90
  %Required
  premium
  
  9.10
  %Required Dividend Yield
  
  10.00
  %  WeightingWeighted average cost of capitalCost of equityRisk
  free rate
  
  
  
  4.71
  %Equity
  risk premium
  
  6.00
  %Beta
  
  1.257.50
  %Cost
  of equity
  
  
  
  12.21
  %
  80.00
  %
  9.77
  %Cost of debtMean
  LIBID/LIBOR
  
  
  
  3.97
  %Premium
  for corporate borrowing
  
  
  
  1.50
  %Borrowing
  rate
  
  
  
  5.47
  %Corporate
  tax
  
  30.00
  %
  -1.64
  %Cost
  of debt
  
  
  
  3.83
  %
  20.00
  %
  0.77
  %Weighted average cost of capital
  
  
  
  
  
  
  
  10.53
  %  Sources  Net Yield listed companies
LBS Risk Measurement Service - index for Software and Computer Services Sector  Risk free rate Bank of
England ten year government securities month end November 2001  Beta LBS Risk Measurement
Service - index for Software and Computer Services Sector  Equity risk premium taken
between Ibbotson 9% and CFSB 3.5%  Bank of England LIBID/LIBOR
end of month rates November 2001  Premium for Corporate
borrowing based on normal business practice 2nd tier rates  Debt Equity weighting
based on normal gearing ratios