Tax Efficient Review of Octopus Eureka EIS Fund with ... - Clubfinance

November 2011 

Tax Efficient Review 

Editor 

Martin Churchill 

BSc (Econ) FCA 

Reviews of EIS offering seeking growth 

Octopus Eureka EIS Portfolio Service 

www.taxefficientreview.com 

Reprinted for the use of Octopus Investments Limited

EIS RISK WARNINGS 

RISK WARNINGS AND DISCLAIMERS The information and opinions expressed and contained in Tax Efficient Review (“TER”) are proprietary to TER 

and are not intended to represent investment advice or recommendation to buy or sell any security. TER is 

not responsible for any damages or losses arising from any use of this information. 

GENERAL RISK WARNINGS 

Fluctuations in Value 

of-Investments 

Suitability 

Your attention is drawn to the following risk warnings which identify some of the risks associated with the 

investments which are mentioned in the Review: 

The value of investments and the income from them can go down as well as up and you may not get back 

the amount invested. 

The investments may not be suitable for all investors and you should only invest if you understand the 

nature of and risks inherent in such investments and, if in doubt, you should seek professional advice before 

effecting any such investment. 

Past performance 

Legislation 

Past performance is not a guide to future performance. 

Changes in legislation may adversely affect the value of the investments. 

Taxation 

ADDITIONAL RISK WARNINGS 

The levels and the bases of the reliefs from taxation may change in the future. You should seek your own 

professional advice on the taxation consequences of any investment. 

Enterprise Investment Schemes 

1. EIS companies are unquoted 

2. The value of EIS Shares can fluctuate and Investors may not get back their investment; 

3. There is no market for EIS Shares and Shareholders may not be able to realise their shareholding unless 

the EIS company is sold or floated on a recognised Stock Exchange. Dividends may not be paid. 

4. Potential Investors should consider that past performance of the EIS Manager is no indication of future 

performance and there can be no guarantees that the EIS Company will meet its objectives. 

5. Investment in unquoted companies can offer good investment returns, but, by its uncertain nature 

involves a much higher degree of risk than investment in a quoted portfolio. 

6. Whilst it is the intention of the EIS Directors that the EIS company will be managed so as to qualify as 

an EIS, there can be no guarantee that it will maintain such status. A failure to qualify could result in the 

Company losing the tax reliefs previously obtained, resulting in adverse tax consequences for Investors, 

including a requirement to repay the 30 per cent. income tax relief. 

7. Levels and bases of, and relief from, taxation are subject to change. Such changes could be 

retrospective. 

8. Two new conditions as to EIS qualification were introduced by the Finance Act 2007 which apply from 

19 July 2007. Firstly, a qualifying company must have no more than 50 full time equivalent employees 

at the time of the share issue. Secondly, a company can raise no more than £2m in any 12 month 

period after 19 July 2007 from any or all of the Enterprise Investment Scheme, the Corporate Venturing 

Scheme and Venture Capital Trusts. 

9. Fees charged by the EIS. Usually there is an initial cost of around 5%-10% to cover issuing the prospectus 

and paying a commission to introducers. This is sometimes paid out of the initial investment paid by the 

investor and the effect is that the EIS company receives around 90%-95%. Thereafter annual running 

costs of about 3%-3.5% are incurred by the EIS and met out of EIS income. On top of these, the EIS 

management usually have a performance incentive which pays a proportion of the return made usually 

after meeting some hurdle. A typical incentive might be that the management receives 20% of any 

uplift in net asset value over a return of original capital. 

Tax Efficient Review is published by Copyright © 2011 Tax Efficient Review Ltd. All Rights Reserved. The information, data and opinions (“Information”) expressed and contained 

herein: (1) are proprietary to Tax Efficient Review Ltd and/or its content providers and are not intended to represent investment 

Tax Efficient Review Ltd 

advice or recommendation to buy or sell any security; (2) may not normally be copied or distributed without express license to do so; 

35 The Park and (3) are not warranted to be accurate, complete or timely. Tax Efficient Review Ltd reserves its rights to charge for access to these 

London reports. Tax Efficient Review Ltd is not responsible for any damages or losses arising from any use of the reports or the Information 

NW11 7ST contained therein. The copyright in this publication belongs to Martin Churchill, all rights reserved and for a fee the author has granted 

Tel: +44 (0)20 8458 9003 Octopus Investments Ltd an unlimited non-exclusive and royalty free licence to use the publication 

2 Tax Efficient Review Reprinted for the use of Octopus Investments Limited November 2011

Product 

Provider 

Anglo 

Scientific 

Table 1: Ranking Table of EIS growth oriented products 

Calculus Livewire Mercia Growth MMC Octopus 

Capital EIS 

Fund 12 

Capital LC2010 EIS Fund 

Eureka 

Parkwalk 

Stellar 

Growth 

EIS Fund 

Type 

Unapproved 

Fund 

Unapproved 


Unapproved 


Unapproved 

fund 

Discretionary 

portfolio 

Discretionary 

portfolio 

Unapproved 

Unapproved 


Strategy 

Targeted 

sectors 

Capital growth 

Medtech, 

high value 

microelectronics 

Businesses 

with long-term 

positive trends, 

a high degree 

of predictability 

and successful, 

motivated 

management 

teams 

Diversified. 

Non sector 

specific 

Administrator Innvotec Ltd Calculus 

Funds under 

mgmt 

Year manager 

set up 

Number of 

investments to 

date 

Number of 

exits 

Average exit 

IRR 

Average time to 

exit 

Product 

Provider 

Strategy 

Software as a 

Service with 

recurring 

Revenue, 

global appeal 

and ability to 

get to revenue 

within 12 

months. 

Software As A 

Service in any 

Market 

Livewire 

Capital 2010 

LLP 

Expansion 

capital for 

high growth 

businesses 

with modest 

capital needs 

Telecoms / 

electronics, 

Medtech, 

cleantech, 

data centre 

management 

and related 

software 

City 

Partnership 

(UK) Ltd 

Growth capital 

for successful 

management 

teams 

Generalist 

investor with 

focus on 

secular growth 

sectors 

Heartwood 

Wealth 

Management 

£15m for all 

Funds £52m £1m £13m £79m 

1988 2000 2007 

8 for the AS EIS 

Funds 24 10 

No exits to date 

Anglo 

Scientific 

With no 

relevant track 

record we have 

not ranked this 

offering 

13 

2010 

(following a 

buy out from 

the established 

investment team) 

13 EIS 

qualifying 

investments 

28% No exits to date No exits to date 49.3% 

Early stage, 

Expansion and 

Development, 

MBO, MBI and 

turnaround 

investments. 

Will invest 

in AIM listed 

companies 

Generalist but 

with a focus on 

environmental, 

technology, 

media, 

telecoms, 

consumer 

lifestyle and 

wellbeing 

sectors 

Octopus 

£49.9m 

(£22.4m 

from Eureka 

and £27.5m 

from Venture 

Partners) 

Early and 

mid-stage 

funding for UK 

University spinout 

companies, 

investing 

alongside 

specialist groups. 

Technology 

across all sectors, 

highlighting 

Energy, Clean-Tech, 

Renewables, Med- 

Tech, IT, Software & 

Communications. 

The Share 

Centre 

Later stage 

funding for 

technology 

companies 

with proven 

technology and 

established 

revenue 

streams 

Technology 

companies 

across all 

business sectors 

Woodside 

Corporate 

Services Ltd 

£5.3m £1m 

2005 2000 2009 2007 

18 

52 (26 through 

Eureka, 26 

Venture 

Partners only) 

6 19 

36.4% (as of 

31st March 

2011) 

4.7 years 2.25 3.46 

Calculus 

28/ 30 

Tax Efficient Review EIS ratings 

Livewire Mercia 

MMC 

Capital Growth EIS 

LC2010 Fund 

With no 





With no 






Eureka 

28 / 30 28 / 30 

Track Record 35/ 40 35 / 40 34 / 40 

Mgmt Team/Deal 

flow/Exit 16/ 20 16 / 20 17 / 20 

Costs 8/ 10 7 / 10 7 / 10 

TOTAL 87 / 100 86 / 100 86 / 100 

8 Nil 


Parkwalk 

With no 






Stellar 

Growth EIS 


With no 





Tax Efficient Review Reprinted for the use of Octopus Investments Limited November 2011 3

Octopus Eureka EIS Portfolio 

Service 

Strategy 

Business 

Fund investing both in UK quoted and unquoted 

companies 

Size 

No cap (evergreen portfolio service) 

Fund Manager 

Octopus Investments (Ventures team) 

Minimum investment £25,000 

Maximum Investment 

None 

Estimated period to full investment 12-18 months 

Commission 

2.5% up-front plus 0.5% trail 

Available Tax Years 2011/12 and 2012/13 

Eureka EIS Portfolio Service is a discretionary portfolio service offering from Octopus Investments, 

one of the largest providers of tax-efficient investments. Through various operating divisions (see 

Table 2), Octopus offers Venture Capital Trusts, Enterprise Investment Schemes and Inheritance Tax 

products in various forms, each with different risk/reward combinations. 

This EIS offering is managed by Octopus' Ventures team, which also manages the Titan series 

of VCTs (see Issue 75 for a review of Octopus Titan VCT 5). Funds raised by this EIS offering will be 

co-invested alongside, and on the same terms as) the Titan VCTs and private investor group, the 

Octopus Venture Partners, run by Octopus. The Octopus Ventures Team has been investing into EIS 

qualifying companies since 1999 and has built a strong track record with a realised IRR of 36.1%. 

This track record however is not one that investors in the Eureka product will recognise as relevant 

for reasons we elaborate on later. 

Eureka aims to offer investors the opportunity to generate returns by investing into a portfolio 

of early stage, fast growth UK companies which also qualify for the EIS tax reliefs. Eureka is clearly 

differentiated from Octopus’ other EIS offering, Octopus EIS. Octopus EIS is designed to produce 

predictable returns for investors by investing into companies with the emphasis on risk mitigation. 

Eureka invests for capital growth 

As at the 15 August 2011, funds raised by this offering totalled £22.4m. 

Eureka started life as an AIM EIS portfolio offering in early 2004 as a three year “rolling” EIS 

portfolio and raised £11.5m. The intention was to hold individual AIM companies for at least three 

years before selling and reinvesting, thus allowing the investor to claim a further 20% tax relief. The 

expectation in 2004 was that the manager would be very rigorous in only selecting those companies 

with clear visibility in revenue streams and where the manager thought there would be very 

TABLE 1: EIS FUNDS UNDER MANAGEMENT by OCTOPUS’ VENTURES TEAM as at 23/08/2011 

Source: Octopus Investments 

Net assets 

£m 

Annual 

Management 

fee 

£m 

Still to be 

invested 

£m 

EIS portfolio funds £22.4m Not disclosed £6.1m 

Funds managed by the same group than can co-invest with EIS funds 

Titan 1 & 2 launched in 2007/08 £29.9m £0.0m 

Titan 3 launched in 2008/09 £19.3m £0.0m 

Titan 4 launched in 2009/10 £20.9m £10.1m by 

31/10/12 

Titan 5 launched in 2010/11 £9.9m £8.8m by 

31/10/13 

Funds managed by the same group than cannot co-invest with EIS funds 

Private investor funds £27.5m £3.0m* 

TOTALS £129.9m £29.1m 

Note: Only includes funds managed by Octopus’ Ventures team, not funds managed by other divisions of Octopus. 

*Source: Octopus Investments, based on Venture Partners 2010 investment 


Matt Cooper - Chairman 

Paul Latham -Managing Director 

Guy Myles - Managing Director 

Investment 

teams 

Strategy 

Early Stage 

Alex Macpherson 

Provides £0.5m to £2m of 

equity to support early stage 

business opportunities in market 

sectors where its directors 

and members of the Octopus 

Investor Group have relevant 

knowledge and experience. 

Seeking to back potential 

global market leaders from 

advanced early stage, expansion 

and development, MBO, MBI. 

Octopus Structure - products and investment teams 

Source: Octopus June 2011 

Octopus Investments 

Simon Rogerson - Chief Executive 

Chris Hulatt - Chief Financial Officer 

Lothar Mentel - Chief Investment Officer 

Alistair Seabright - Head of Unquoted Investments 

Unquoted Investments 

Alistair Seabright 

Head of Unquoted Investments 

Octopus Ventures 

Alex Macpherson 

Growth Capital 

Chris Allner 

Provides £2m to £8m of 

equity to MBO and expansion 

capital fund raising. Seeking 

strong management teams 

and successful, high growth 

companies typically with historic 

annual earnings over £1m. 

Specialist Finance 

Mario Berti 

Deals where Octopus is confident 

that there is a high level of 

capital security. The companies 

will operate in sectors where there 

is a high degree of predictability, 

ideally with contractual 

revenues from financially 

sound 

customers. 

Quoted Capital 

Lothar Mentel 

Chief Investment Officer 

Octopus Smaller 

Companies 

Richard Power 

Provides £1m to £5m of equity 

to VCT qualifying companies 

that are issuing new shares on 

AIM. Manages AIM portfolios 

for Business Property Relief, 

Targeted 

sectors/ 

geography 

Funds 

People 

Examples of 

trades 

£112m from: 

Titan VCT 1 £13m 





Eureka EIS 1 £4m 

Eureka EIS 2 £25m 

Alan Wallace, Alliott Cole, Luke 

Hakes, Simon Murdoch, Jo 

Oliver, Anthony Collinson, Simon 

Andrews 

£104m from VCTs: 

Eclipse VCT 1 £24m 




CFE Fund £32m 

Chris Allner, Jane Vinson, Damien 

Lane, Alistair Brew 

All considered/ UK 

£750m from: 

Octopus VCT £50m 

Octopus IHT Service £54m 

Octopus Protected EIS 

(tranches 1 – 10) £217m 

Octopus ITS £300m 

Apollo 1 £8m 

Apollo 2 £8m 

Apollo 3 £24m 

Apollo 4 £11m 

OVCT 2 £20m 

OEIS £58m 

John Thorpe, Ross Bryan, Joe 

MacCarthy, Leon Clarance, 

Jonathan Samuels, Stuart Nicol, 

Matt Setchell, Hugh Costello, Ed 

Fellows, Joe Hartman, Melanie 

Hayes, Kat Johnston, Simon 

Pickett, Edward Keelan 

Media Investments 

Ticketing 

Wholesaling 

IT Outsourcing 

Bridge Financing 

Asset Backed Lending 

£291m from: 

Octopus First AIM £45m 

Octopus Second AIM £30m 

Inheritance TS £105m 

Octopus Micro cap Fund £21m 

Octopus Absolute UK Equity £90m 

Andrew Buchanan, David 

Crawford, Edward Griffiths, 

Richard Power, Paul Stevens, Kate 

Tidbury 


limited downside risk over that period. 

However, the AIM market has suffered major falls in value since mid-2007 and the £11.5m raised 

has declined significantly. 

In April 2007 changes were made to the VCT and EIS company qualification rules. Specifically 

a cap was introduced on the number of full time employees that a company could have (50 employees) 

and there was a reduction in the gross assets that a company could have pre-investment 

(reduced from £15m to £7m). The change in the rules was clearly designed to drive VCT and EIS 

investment towards smaller companies. As a result of these changes, Octopus withdrew the poorly 

performing AIM based Eureka EIS Portfolio Service as the Octopus AIM Fund Management Team was 

of the view that very little of the deal flow that they considered to be appropriate for investment 

would qualify under the newly introduced rules. 

In May 2008, Eureka EIS Portfolio Service was re-launched by Octopus. The management of 

Eureka was taken on by the Ventures team and the investment remit was widened to include 

unquoted companies. The majority of the investments made through Eureka are into unquoted 

businesses sourced by the Ventures team. The Eureka investment mandate continues to allow AIM 

investments. Approximately 25% of the current Eureka portfolios by both value and holding are 

invested into AIM companies. Octopus claim that having the ability to invest into both unquoted 

and AIM listed companies enables them to add more diversification to their client portfolios. 

Eureka is a discretionary portfolio service, not a pooled investment or fund and it is expected that 

clients will receive 10-15 holdings within their portfolios over the planned 12-18 month period it 

takes on average for clients to get fully invested. Eureka is open year round and money is raised on 

an ongoing basis. Octopus claim UK smaller company investing is a core area of expertise. 

Investments made by Eureka will be higher risk than investing in shares listed on the London 

Stock Exchange Official List and, being unquoted, will be difficult to realise. 

Octopus Ventures look at 3,000 opportunities a year and make 10-15 investments on average. 

Octopus’ AIM team is one of the largest in the City, numbering six people. Octopus invests across 

the AIM market through a number of different mandates. The Octopus AIM managers are confident 

that they see every EIS qualifying company looking to raise money on AIM. At present they invest 

into approximately one in every twenty companies that they see which qualifies under the EIS rules. 

The Government announced in the last Budget that from 6th April 2012 the qualification rules for 

TABLE 3: Matrix of individual responsibilities - Octopus Ventures - Data source Octopus June 2010 

NAMES 

Alex 

Macpherson 

Alan 

Wallace 

Anthony 

Collinson 

Jo 

Oliver 

Alliott 

Cole 

Simon 

Murdoch 

Luke 

Hakes 

Samantha 

Ling 

Simon 

Andrews 

George 

Whitehead 

EIS/VCT RELATED WORK 

Deal origination % 10% 15% 5% 10% 15% 10% 15% 10% 10% 10% 

General enquiries % 5% 5% 30% 35% 

New deal doing % 15% 35% 5% 35% 40% 5% 40% 20% 5% 20% 

Investee board seats No. 1 0 8 5 5 2 4 0 6 0 

Sitting on Boards/Monitoring % 5% 65% 25% 25% 40% 25% 50% 

Fund raising % 20% 20% 10% 10% 10% 20% 5% 20% 

Internal issues % 25% 10% 5% 5% 5% 5% 10% 5% 10% 

Exits % 15% 15% 15% 5% 5% 40% 5% 5% 25% 

NON EIS/VCT WORK 

Non EIS work 5% 10% 5% 5% 5% 

TOTAL 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 

Years in venture capital 11 13 16 10 3 12 2 3.5 5 12 

Years involved with EIS Funds 10 10 10 10 3 10 2 3.5 0 12 

Years with current team 10 10 10 2.5 3 1 2 3.5 1 0 


EIS companies will be changed to allow investments into larger companies. Octopus claim that they 

are well positioned for this change. On the unquoted investment side they have a further team of 

fund managers who invest into later stage companies – this is the management team that run the 

Eclipse funds. The AIM team already researches the whole market. 

In our view, there are three aspects of this offering that set it apart from the rest of the offerings: 

the “Octopus Venture Partners” approach to investing, the potential inclusion of AIM listed stocks 

and the focus on Early stage, Expansion and Development investments. 

The “Octopus Venture Partners” have a dual role. The members pay an annual fee of £3,000 to be 

shown investment opportunities in which they can co-invest if they so wish. They are also a pool of 

experienced investors who provide both a source of deal flow (the experience of the Ventures team 

is that 25% of transactions originate from the Venture Partners) and a source of industry knowledge. 

The Venture Partners will be able to invest pari passu with the EIS funds and VCTs managed by 

Octopus' Ventures team (Octopus Titan 1&2, for which Octopus raised £30m in the 2007/08 tax year, 

Octopus Titan VCT 3, raised during the 2008/09 tax year and which closed in August 2009 after a top 

up totalling £20m, Octopus Titan VCT 4 for which Octopus raised £22m in the 2009/10 tax year and 

Octopus Titan VCT 5, which has raised over £12.5m and remains open. 

Octopus has commented as follows about its relationship with the Venture Partners (VPs) and the 

additional resource that this provides them. 

“Although we come from different professional, industry, and scientific backgrounds, we share 

a real passion for business. We are committed to our companies. We view our management 

teams both as partners and customers. We bring considerable experience and expertise to our 

companies along with no small amount of ambition, energy, resolve and creativity. 

We also understand just how difficult it is to create and grow a business. It's not just about having a 

great idea and a capable team: having a network of contacts and real world experience to draw upon 

counts for as much. That's why we have been building both an informal and a formal network for 

over a decade. The latter, the Octopus Venture Partners, now numbers in excess of 100 businessmen, 

leaders of commerce, and entrepreneurs. This group co-invests with Octopus and is a unique and 

invaluable resource for our companies to draw upon. This blend of knowledge and skill has allowed 

us to help more than 60 UK companies thrive in recent years. 

The 100 members of the Octopus Venture Partners are more than just co-investors - they are introducers, 

both of deals and industry contacts; entrepreneurs; mentors; advisors; board members; and 

much more. They share our passion for business and our desire to see businesses succeed. Ultimately, 

their knowledge and contacts can be transformational for our portfolio companies. 

We involve the Partners at an early stage in our investment decision making process, often engaging 

members with relevant industry experience as part of our initial due diligence. This enables us to 

identify outstanding investment opportunities sooner and to make beneficial introductions to the 

investee Company earlier. 

Once Octopus has agreed investment terms with a Company, the management team will be required 

to present the investment opportunity to members of the Octopus Venture Partners who are entitled 

to invest alongside our VCT and EIS funds on the same terms. The presentation gives the Partners 

the opportunity to assess the Company's investment case and, as importantly from the Company's 

perspective, often serves to identify Venture Partners that are qualified and available to add value to 

the Company.” 

In summary, then, the VPs potentially contribute to the investment process in four ways: 

1. The VPs bring high quality dealflow to Octopus, typically on a proprietary basis. 

2. Discrete VPs often help in the due diligence carried out by Ventures team. Octopus tells us that 

often they meet talented management teams operating in sectors in which none of the Octopus 

Fund Managers have direct experience. In this instance, VPs who have experience in the 

relevant sector, are invited in to help with due diligence. This enables the Octopus managers 

to consider a far wider range of sectors for the portfolios. 

3. Prior to Octopus investing into a company, the VPs must endorse the investment decision 


TABLE 4: Unquoted Eureka portfolio analysis for Tax Efficient Review as at 23 August 2011 

Investee name 

Amount invested 

Current Value 

Percentage of equity held 

Date of first investment 

Syndicated 

Lead investor 

Structure of investment 

Industry sector 

Financing stage 

Valuation method 

Board seat 

Who did you co-invest with 

Total invested in this financing round 

£000 £000 Y/N Y/N Y/N Names £000 

Technology 

Written down 

The Key Revolution 120.5 0 2.94 May-08 N Y A Ords Hardware & Early Stage to zero – Y 

1250 

Equipment 

Company in 

GB Environmental 75 0 1.67 May-08 N Y Ords Environmental Early Stage Administration Y 668 

True Knowledge 241 263 2.52 Jul-08 N Y A Ords 

Calastone 332 332 3.17 Oct-08 N Y A Ords 

Zoopla 404 1260 3.42 Jan-09 N Y B Ords 

Software & 

Computer 

Services 


Computer 

Services 


Computer 

Services 

e-Therapeutics plc 588 691 3.02 Mar-09 N Y Ords Healthcare 

Phasor Solutions 300 150 5.11 Mar-09 N Y Ords Technology 

Phase Vision 429 336 11.88 May-09 N Y A Ords Technology 

Surrey NanoSystems 599 599 9.82 Aug-09 N Y A Ords Technology 

Graze 273 325 2.91 Jul-09 N Y A Ords 

Food & 

Beverage 

Getoptics 498 374 10.36 Sep-09 N Y A Ords Retail 

Early Stage 

Development 

Capital 

Expansion 

Capital 

Development 

Capital 

Development 

Capital 

Development 

Capital 

Early Stage Pre 

Revenue 

Development 

Capital 

Acquisition 

Finance 

Cost of last 

funding - 9% 

uplift since 

original 

investment 

Y 2000 

Cost Y 2000 

Cost of latest 

funding – 

187% uplift 

from original 

investment 

Market price 

30/04/2011 

50% 

impairment 

Cost of latest 

funding – 50% 

reduction 

from original 

investment 

Y 2000 

N 2000 

Y 913 

Y 1100 

Cost Y 


Titan VCT 1, 

2, 3, Octopus 

Venture 

Partners 

1750 

Y 1392 

Cost of last 

funding – 

20% uplift to 

original 

25% 

impairment Y 1355 

AQS 550 550 7.3 Feb-10 N Y A Ords Cleantech 

Y 2000 

Metrasens 450 450 7.61 Feb-10 N Y B Ords Technology Cost Y 1500 

Mi-Pay 450 450 6.07 Feb-10 N Y B Ords Telecoms Y 1840 

Money Workout 450 0 9.93 Mar-10 N Y A Ords 

Other 

Services 

Semafone 632 632 15.43 Jun-10 N Y A Ords Technology 

Bowman Power 585 585 5.7 

Elonics 554 554 5.65 

Executive Channel 522 522 8.4 

PrismaStar 560 560 8.95 

Michelson 

Diagnostics 

485 485 8.61 

Aug- 

2010 

Sep- 

2010 

Sep- 

2010 

Sep- 

2010 

Oct- 

2010 

Administration Y 1518 

Y 1554 

N Y Ords Engineering Development 

Y 1833 

Capital 

N N B Ords Technology Y 1917 

Cost 

N Y A Ords Media Y 2000 

N Y A Ords Technology Y 2000 

N Y A Ords Healthcare Y 1585 


TABLE 4: Unquoted Eureka portfolio analysis for Tax Efficient Review as at 23 August 2011 

Investee name 

Amount invested 

Current Value 

Percentage of equity held 

Date of first investment 

Syndicated 

Lead investor 



Financing stage 

Valuation method 

Board seat 

Who did you co-invest with 

Total invested in this financing round 

UltraSoC 

Technologies 

£000 £000 Y/N Y/N Y/N Names £000 

510 510 14.02 

Oct- 

2010 

N Y B Ords Technology 

Y 

2000 

Diverse Energy 441 441 6.24 

Curlet/10CMS 490 490 12.21 

Vega Chi 483 483 4.48 

Applied 

Superconductor 

370 370 5.08 

TOTALS £11.392m £11.412m 

Dec- 

2010 

Dec- 

2010 

Jan- 

2011 

Jun- 

2011 

N Y A Ords Environmental Y 2000 


Titan VCT 1, 

Development 

N Y B Ords Technology 

Capital 

Cost Y 2, 3, Octopus 1596 

Venture 

Partners 

N Y A Ords Technology Y 1621 

N Y C Ords Technology Y 1500 

Table 5: Eureka AIM performance - Prices as at 21st October 2011 

Source Octopus 

Date Invested 

Book Cost 

p 

Mid Price 

p 

Performance 

% 

EKF Diagnostics 30-Jun-10 0.150 0.2725 81.7% 

LiDCO Group 22-May-09 0.100 0.1300 30.0% 

Transense Technologies 30-Jun-10 0.045 0.0538 19.4% 

Nasstar Plc 11-Jul-11 0.08 0.0913 14.1% 

Microsaic 6-Apr-11 0.320 0.3150 -1.6% 

Hanger 8 10-Nov-10 1.500 1.0800 -28.0% 

Photonstar LED *** 2-Apr-09 0.360 0.1425 -60.4% 

SnackTime 17-Dec-09 1.700 0.6400 -62.4% 

Imaginatik 10-Aug-09 0.060 0.0060 -90.0% 

Table 6: Current valuation of 26 investments made by Octopus Ventures team for Eureka investors 

Figures based on original cost. Source Octopus Ventures 

Number of Cos % based on original 

cost 

25% impairment 1 4% 

50% impairment 1 3% 

Total loss - In Administration 3 6% 

Cost 16 70% 

Cost of last funding – 20% uplift to original 1 2% 

Cost of last funding - 9% uplift since original investment 1 2% 

Cost of latest funding – 187% uplift from original investment 1 4% 

Cost of latest funding – 50% reduction from original investment 1 4% 

AIM at Market price 30/04/2011 1 5% 

Total 26 100% 


Track Record 

made by the Octopus Fund Managers. This endorsement comes through the potential 

investee company presenting directly to a group of the VPs. Ultimately, unless a reasonable 

number of VPs commit to invest into a deal (typically 5-15% of the capital for each deal comes 

from the VPs) Octopus will not invest. Octopus sites this as being one of the key ways in which 

they mitigate risk. 

4. Post-investment Octopus works actively with its portfolio companies in order to maximise 

the value from each investment. The VPs provide a significant and valuable resource in this 

process. Often VP members will sit on the Boards of investee companies or act as Octopus’ 

observer/monitor within that company. 

The aim of this EIS offering is to create a diversified portfolio of investments in early stage unquoted 

companies with a focus on the environmental, technology, media, telecoms, consumer lifestyle and 

wellbeing sectors. 

A key number for potential investors in an EIS Fund offering is the amount that, after costs, will be 

invested in the underlying EIS qualifying companies as this number will drive the initial income tax relief 

and any amount of deferred CGT. Octopus tells us "Our estimate is that the amount invested into qualifying 

companies will be approximately £92,000 assuming that the IFA rebates the commission" (see Table 5). 

We asked Octopus for its view of the time taken from the investment to investors receiving EIS 

certificates. Their response is "It is expected that investors will receive the EIS 3 certificates approximately 

3 months after investment into each of the qualifying companies". 

Tax Efficient Review Strategy rating: 28 out of 30 

This is an offering from Octopus that has been established for 3.5 years now (with a different 

strategy to previous Eureka EIS fund raisings). During this period, the economic conditions have altered 

substantially with the credit crunch and economic upheaval effecting stock markets globally. 

A total of 26 qualifying investments made into unquoted companies in this time (Table 4) and 9 

into AIM listed companies (Table 5). The aggregate investment by Eureka into all of the companies 

managed by the Ventures team totals £11.392m. 

The Eureka portfolio (Table 6) of 26 unquoted investments made by the Ventures team now has 

three fully written-down, three impaired, increases in value from four of the businesses and the 

remaining sixteen held at cost. 

As these businesses are unquoted (with the exception of e-Therapeutics) they are valued in accordance 

with International Private Equity and Venture Capital Guidelines. In the case of the Eureka 

investments, this means the valuation of a business is generally left at cost unless a further funding 

round has taken place or the performance has been poor. If a further funding has taken place, 

the investment will be re-valued up or down to reflect the most recent issue price. The investment 

will also be re-valued if there has been an impairment to trading or an impairment in the business’ 

outlook. Here the valuation of the investment will be reduced at the six monthly re-valuation 

dates even though no share transaction may have taken place. On this basis, the Eureka portfolio 

managed by the Ventures team is currently valued at £11.412m with a cost price of £11.392m. Full 

details are in Table 4. 

Looking at the individual companies, it is perhaps worth considering two in particular. Zoopla, 

an investment made in January 2009, is now the UK’s second most visited website after Rightmove 

(Source: Nielson). Whilst significant in size, Rightmove is a listed business valued at over £1.2bn. 

Meanwhile, Calastone, the mutual messaging service, releases an announcement regarding new 

clients on an increasingly regular basis as more and more of the industry adopts the service (Source: 

Calastone press announcements). 

The AIM team have made 9 investments since Eureka was relaunched in May 2008. The total 

capital deployed into these investments is £4.481m. Full details of the AIM investments are detailed 

in Table 6. Performance for the AIM investments is straightforward as this is a quoted market. 

Overall the performance of the Eureka offering has not been stellar and, with no exits so far from 

those investments specifically made as EIS investments, we rate the Eureka performance inferior to 


the Calculus and MMC. 

Octopus Investments is one of the UK’s leading smaller company fund managers, with around 

20,000 investors and over £2.5 billion under management across its range of products. In addition 

to the Octopus Titan VCTs, Octopus currently manages 12 other VCTs. In 2007, 2008, 2009 and 2010 

independent financial advisers voted Octopus “Best VCT Provider of the Year” at the Professional 

Adviser awards. Octopus Investments was voted VCT Manager of the Year at the Unquote British 

Private Equity Awards in 2010. 

The Ventures team was bought by Octopus Investments in September 2007. Prior to joining 

Octopus the team traded under the name of Katalyst Ventures. Katalyst was set up in 1999 and has 

invested in early stage unquoted companies over the last 12 years. All of the investments that the 

Ventures Team has made since 1999 qualified for EIS tax reliefs. 

Of the 52 investments made since 2000, 19 investments have been realised (full exit made 

whether positive or negative). The IRR of the realised part of the Ventures portfolio, invested 

through the EIS tax wrapper, is 36.1% (05/10/99 – 31/03/2011). Details of the realised element of 

the portfolio are provided in Table 7. 

Tax Efficient Review Track Record rating: 34 out of 40 

Investment Team 

The Ventures investment team comprises of: 

Alexander Macpherson has extensive experience of investing into smaller companies. Before 

joining Octopus, he spent ten years with SG Warburg Group and as a trader and risk manager 

in the equity derivatives department. He then worked with a number of small businesses. 

Alan Wallace has more than eight years experience making investments into smaller companies, 

and before Octopus he had worked in senior management and marketing roles at a number of 

companies, including Sara Lee UK Ltd, Dairy Crest plc, and Great Universal Stores plc. 

Jo Oliver is an entrepreneur who has extensive experience of working with and investing in 

smaller companies. He has founded several businesses and has also held senior roles in equity 

research at Merrill Lynch and Lehman Brothers. Jo is a chartered accountant and previously 

worked at Arthur Anderson. 

Simon Murdoch a leading internet entrepreneur, investor and former Vice-President Europe, 

Amazon.com. Simon has invested in and advised several early stage internet success stories 

including Betfair, and has also been personally involved with some of the UK's most successful 

internet and technology businesses including LoveFilm and Shazam. 

Anthony Collinson is a business angel investor and strategic consultant to small businesses, he 

has over 30 years of senior line management experience. 

Alliott Cole has a corporate finance and legal background, has held positions at N M Rothschild, 

ashurst and IBM and is a qualified lawyer. 

Luke Hakes has considerable experience in the assessment of both business challenges and strategies 

and prior to joining Octopus worked in both the scientific and Management consultancy 

sectors, having held positions with Apple, Diamond and Goldman Sachs. 

Simon Andrews brings ten years' experience in equity research and analysis, along with portfolio 

management, and has particular expertise in technology stocks. Previously he was vice president 

at commercial bank SVB Financial Group, responsible for business development, portfolio 

management and venture loan structure. Prior to this, he held senior and specialist roles at 

Jefferies International, Lehman Brothers, Merrill Lynch and BNP Paribas. 

Samantha Ling focuses on managing the Octopus Investor Group and their individual portfolios 

and oversees the investment process. 

George Whitehead was previously NESTA's Business Development Director, where he headed up 

all its programmes related to supporting growing companies. Before that, he was an Investment 

Manager at Oxford Innovations, where he managed the Oxford Investment Opportunity 

Network (OION), and also managed the incubations program for the University of Toronto's 

Innovations Foundation. 

Tax Efficient Review Reprinted for the use of Octopus Investments Limited November 2011 

11

TABLE 7: Octopus Ventures realisation events 

Source: Octopus Ventures 

Investee Company name JHC RevGen 

ALP 

(LearnLogic) 

Obvious 

Solutions 

Network 

Analytics 

Press Red 

Structure of investment Equity Equity Equity Equity 

Equity/Convertible 

bonds 


bonds 


Support Services 

Software & Computer 

Services 


Transport 

Information 

Technology Hardware 

Media & 

Entertainment 

Early Stage Pre- Early Stage Pre- Later Stage Preprofit 

expansion profit expansion Revenue 

Later Stage Pre- 

Early Stage Pre- 

Financing stage when first invested 

Turn around 

Revenue 

Revenue 

Board seat Y N N N Y Y 

Co-invested with - - - - London Capital SEGF 

Total value of financing round £480,000 £105,000 £310,407 £211,675 £310,137 £263,902 

Amount originally invested £250,000 £105,000 £230,000 £211,675 £171,990 £237,500 

Date 13/4/2000 01/04/2000 28/06/2000 27/07/2002 27/08/2004 04/04/2003 

Further investment amounts (if any) 

Realisations/Dividends 

£230,880 

9/11/01 

£101,113 100% 

Write Off 

£37,188 28/7/01 

£10,000 

12/12/01 

£33,219 

28/3/02 

100% 

Write Off 

100% 

Write Off 

£120,649 14/11/05 

£17,497 

26/5/06 

100% 

Write off 

£26,401 6/7/05 

100% 

Write Off 

Investee Company name ScreenSelect SkillsMarket 

Site 

Confidence 

ITM 

Power 

CityCall Equator Net JHC 



bonds 

Loan Equity Equity Equity Equity Equity 


Media & 

Entertainment 


Services 


Services 

Electronic & Electrical 

Equipment 

Telecom 

Services 

Leisure & Hotels 


Financing stage when 

first invested 


Revenue 

Later Stage Preprofit 

expansion 


Revenue 


Revenue 

Later Stage Preprofit 

expansion 


Revenue 

Turn around 

Board seat Y Y Y Y Y Y Y 

Co-invested with - - - - - - - 

Total value of financing 

round 

£602,073 £145,000 £747,683 £715,500 £400,000 £240,000 £480,000 

Amount originally 

invested 

£250,000 £145,000 £309,169 £715,000 £400,000 £240,000 £250,000 

Date 11/07/03 08/05/01 08/05/01 6/3/02 16/01/01 05/10/99 13/4/2000 

Further investment 

amounts (if any) 

Realisations/Dividends 

£352,074 14/4/04 

£196,193 

23/8/04 

Residual in 

LoveFilm 

£962,772 

£156,218 

18/4/05 

£150,435 30/4/02 

£249,334 

24/11/05 

£1,000,793 

25/1/07 

£220,082 

8/6/07 

Earn out 

£977,916 

15/1/08 

£65,992 

23/1/03 

£10,229,751 

6/3/05 

£162,800 

12/11/04 

£480,000 

3/2/00 

£230,880 

9/11/01 

£101,113 

12/6/07 

Further earn-out 

potential 

Annual Internal Rate of 

Return 

23% 2% 27% 146% -21% 709% -22% 

Length of investment 4.2 years 3.9 years 4.79 years 3 years 2.7 years 0.3 years 7.2 years 


Deal Flow 

Exits 

Costs 

Conclusion 

The investment team dedicated to investing Eureka funds and the Titan VCTs is ten people strong 

spending the equivalent of 3.3 man years on investing the funds (see Table 3 rows "Deal Origination" 

plus "New Deal doing"). The average deal size of the deals done to date is around £1,500,000 

and in our view unquoted deals take around four months on average to complete. 

Funds still to invest in Octopus Titan 1, 2, 3 and 4 to achieve VCT qualification total £10.1m (see 

Table 1). Investment of Titan 5 is due to start in Q4 2011, and at the current time requires approximately 

£8.8m to be invested to achieve VCT qualification. Our assumptions (3.3 full-time equivalent 

team members, deal capacity per person per year of three deals, deal size of £1.5m) would suggest 

the maximum deal making capacity of the team is around £14.85m per year or £44.55m over the 

next three years. 

In our view this would be a relatively demanding workload for the team, as currently resourced, 

but with Eureka investing alongside the Titan Funds, the deal flow for both products is the same. 

Deal flow is sourced from industry contacts of the team members and there is significant proprietary 

deal flow from the ”Octopus Venture Partners". Octopus is one of the most active deal doers in 

the early stage venture capital market place (Source: Ascendant last two quarter reports of 2010). 

The team reviews over 3,000 business summaries, reads 1,000 business plans in detail, meets with 

250 different businesses and ultimately makes 10-15 investments per annum on average. 

Exits will normally be by way of a trade sale. It is interesting, although not relevant to the Eureka 

funds, that an Octopus Venture Partners investment Plum Baby was sold in May 2010 delivering 

in excess of 28% IRR, and another Lovefilm was sold to Amazon in February 2011, delivering a 3.5 

times return to investors. This transaction has exact parallels with the way in which Octopus’ Ventures 

team now invest, with the Venture Partners investing 20% of the investment round and VCT 

and EIS funds investing the balance. In this case, the funds were non-Octopus as Eureka and Titan 

VCTs had not been established at the time of investment. 

As detailed above, from a total of 52 investments made by the Ventures team since 1999, there 

have been 19 exits resulting in an IRR of 36.1%. 

Tax Efficient Review Management Team/ Deal Flow/Exit rating: 17 out of 20 

Initial costs are fixed at 2.5% excluding any introducer commission (up to 2.5%). The Annual 

Management Charge is 2.0% + VAT of NAV from which trail commission of 0.5% per annum is 

paid to introducing IFAs. There is a dealing fee of 1% on the purchase and sale of shares. The 

performance fee is a standard 20% of any distributions over original investment. An average set of 

charges but with a performance fee without a minimum return feature. See Table 10 for a total fees 

comparison with Calculus and MMC offerings over a five year period. 

Tax Efficient Review Costs rating: 7 out of 10 

The Eureka Portfolio Service is a bespoke portfolio service structured in such a way as to increase 

the return and reduce the risk of the investment. The aim is to create a diversified portfolio of 

investments in early stage unquoted companies with a focus on the environmental, technology, 

media, telecoms, consumer lifestyle and wellbeing sectors. There are two aspects of this offering 

that set it apart from the rest of the offerings: the “Venture Partner” approach to investing and the 

focus on Early stage, Expansion and Development investments. 

This is a more recent EIS offering from Octopus – it was launched in May 2008. However, the 

team has been investing in EIS qualifying deals for the past 12 years. Their realised track record 

from the EIS qualifying investments made over that time is a 36.1% IRR but in our view this is not 

directly relevant to potential investors and based on no exits so far from EIS investments we rate 

this offering below Calculus and on a par with MMC. 

Tax Efficient Review Total rating: 86 out of 100 


13

Table 8: Eureka Unquoted Portfolio Summary 


True Knowledge Ltd has developed an Internet search engine website that answers questions. Finding information on the Internet currently involves a 

process of trial and error, hoping that the search engine retrieves the information you’re looking for. True Knowledge has devised technology that resolves 

this fundamental problem by operating a more intuitive system. It intelligently answers questions asked on any topic in plain English. The company is 

expanding this technology platform into a mobile application for conversational search, named Evi. 

The Key Revolution Ltd - The work of the Key Revolution heralds the move towards ‘cloud computing’. Its patented technology enables Internet users to 

securely authenticate themselves and access their own files on any computer, then clear their text or data. The highly innovative Mobiu key device combines 

both SIM card and chip and pin features. Lost or stolen Mobiu keys can also be deactivated, ensuring total security. 

Calastone Ltd is the UK’s only independent transaction service for the mutual fund industry. It enables buyers and sellers of mutual funds on different 

platforms to communicate orders electronically by providing a universal message communication and ‘translation’ service. This is being welcomed in an 

industry which has not previously been able to invest in the real-time exchange of information between participants. Orders are commonly communicated 

by fax or telephone with a high level of manual re-keying and manual error correction. Calastone’s ‘translation’ service means that neither the transmitter 

nor receiver need purchase additional technology or change their existing systems. Furthermore, there is no barrier or cost of entry. 

Zoopla.co.uk is an award-winning online property information service and community website, presenting information on house pricing, free valuation 

estimates, for sale listings, and local community information. Zoopla has become the UK’s leading website for house prices and value data, as it provides 

the most comprehensive source of residential property market information. It is also the UK’s most active property community, with over a million user 

contributions to its website in 2008. 

Phasor Solutions Ltd provides flat panel phased array antennae at a fraction of the cost associated with traditional phased array technology. Phased array 

products are groups of antennae constituting a radar system that enhances and controls signal strength. They are used across many industries including 

travel and engineering and can facilitate communication signals. Phasor has the potential to transform the ‘communication on the move’ market through its 

phased array product offering. Phasor develops phased array antennae with multiple commercial uses, which include enabling moving host units, such as 

trains and airplanes, to deliver broadband Internet access and high speed communications. Additionally, Phasor’s product range, which will be expanded to 

include radars, has numerous other applications in both the aerospace and military sectors. Phasor’s innovative flat panel satellite antenna enables a 90% 

reduction in system costs, whilst ensuring a similar, if not greater, level of performance than other products. 

e-Therapeutics plc is an AIM listed, (ETX.L), drug discovery and development company. It focuses on three core areas: the discovery of new drugs; discovering 

novel uses for existing drugs; and analysis of the interactions between different drugs. The company has developed a unique drug discovery technology that 

enables it to assess drug candidates for high efficacy and safety ahead of clinical trials. The use of this technology dramatically reduces the time between 

drug discovery and market applicability, and reduces the risks associated with clinical trials. The company is currently progressing with the preclinical 

and clinical development of a number of innovative drug candidates to which the new technology was applied. The treatments are now at an advanced 

stage of testing, validating the therapeutic attributes that e-Therapeutics’ drug discovery system predicted for each candidate. The development and 

commercialisation of the company’s drug candidates that have generated clinical data will be supported initially by licensing these to partners operating in 

smaller pharmaceutical markets. 

Phase Vision Ltd is a manufacturer of optical inspection solutions for high-speed, three dimensional shape measurement with micro-scale accuracy. The 

Company has developed (and patented) a unique optical approach to the measurement of very large (>100cm) industrial items with free-form or curved 

surfaces, such as ship propellers and aircraft wings to tighten manufacturing tolerances, increase throughput and reduce waste. Phase Vision’s metrology 

solutions are more cost efficient than current laser processes, and accurately measure mechanical systems to micron level, thus providing superior 

performance. Phase Vision’s systems use a fringe projection approach and comprise of one or more projector/camera units that project, and image, patterns 

of light onto the object to be measured. Sophisticated algorithms are then used to accurately calculate the dimension of the object. Phase Vision’s clients 

include some of the biggest names in the automotive, aerospace, chemical and medical device engineering sectors. The market for large scale measurement 

with micro-scale accuracy is estimated to be worth around £2 billion per year, with growth of around 6% per annum. 

Graze is the first UK Company to deliver healthy and nutritionally balanced food by post straight to the home or office. Graze’s snack boxes cost only £3.49 

and are sent by Royal Mail for next day delivery. The Graze product range includes over 100 products to choose from, all free from artificial colourings, 

flavourings and preservatives. Customers can also place orders for personalised boxes, specifically tailored to meet their tastes, dietary and nutritional 

requirements. Graze promotes a varied and balanced diet through facilitating the intake of a wide variety of smaller portions of natural, high energy foods 

throughout the day. Its product is very much in tune with customer needs and the demands of modern living, as people become ever more conscious of 

health and convenience. 

Surrey NanoSystems was founded in November 2006 in partnership with the University of Surrey’s Advanced Technology Institute. The Company is a pioneer 

in the development of highly advanced equipment and processes for growing Carbon Nanotubes (CNTs). CNTs are molecular-scale tubes of graphitic carbon 

that possess extraordinary electronic and mechanical properties. 

Surrey NanoSystems is unique in its ability to consistently grow CNTs at temperatures as low as 350°C. Historically, nanotechnology specialists have been 

unable to grow CNTs below 700°C, preventing their use in a range of other applications, due to the damage high temperatures cause to other materials 

used in semiconductor chips. For this reason, NanoGrowth®, the Company’s unique growth technology, represents a major breakthrough for the rapidly 

developing field of nanoelectronics, the future manufacture of high performance semiconductor chips, and their use in a far broader range of sectors. 

Getoptics Ltd is an online retailer of contact lenses, which was formed through the acquisition of Getlenses and Postoptics. GetOptics is now the largest 

online retailer of contact lenses in the UK. The company has a turnover of circa £6 million and 25 to 30% market share of the online market, including a 

‘white label’ contract (to supply goods that are then rebranded) with a large UK retailer. 

iProfile, formerly known as SkillsMarket, works with recruiters to make the business of finding and placing the right people a lot simpler and quicker. The 

Company’s website enables candidates to transform any static CV into a dynamic professional profile kept up-to-date by candidates themselves. The aim of 

iProfile is to bring the traditional CV template into the 21st century. 




Recruiters save time and money on CV processing by searching up-to-date databases and unleashing the potential of candidate information - making it 

more accurate and responsive, with the ability to search and sort in real time, transforming the efficiency of recruitment processes. 

Soil Xchange is a subsidiary of AQS, which is a waste management business focusing on soil stabilisation and remediation by means of a proprietary process 

and equipment. Soil Xchange’s aim is to create strategic hubs across the UK, specifically with the objective of taking in hazardous soil and waste, and 

exchanging it for recycled, clean soil, using AQS’ market leading soil remediation knowledge and equipment, the ‘Eco Warrior’. 

Mi-Pay was founded in 2004 with the objective to establish itself as a leading processor of payments for the fast-emerging mobile money sector. The service 

enables customers to ‘top-up’ their pre-paid mobile phone directly online, or via their mobile phone, rather than using indirect brand channels such as 

PayPoint or bank ATMs. Benefits of the direct service include cost reductions for mobile network operators and a more personal engagement with customers, 

removing the anonymity of customer relationships and allowing for substantial improvements in customer retention. 

Metrasens is a technology business specialising in metal detection products for the healthcare and security markets. It was founded in June 2005 by two 

former employees of QinetiQ, a company specialising in defence security and technology. Its core technology was developed within QinetiQ, with which 

Metrasens maintains strong links. Metrasens’ products work by detecting magnetic material. Its Ferroguard® MRI (magnetic resonance imaging) detection 

system provides visual and audio alarms at the point of detection. It is used in hospitals in rooms containing MRI units, where it’s crucial, for health and 

safety reasons, to detect such material. The Ferroguard® system not only increases safety but also decreases potential costs, through reducing the likelihood 

of injuries and damage from projectiles in the MRI units. The company has also developed the FG1 Portable Security Pole, designed for multiple niche 

applications, such as street knife detection operations. 

Money Workout purchases and generates mortgage enquiries that it matches to the best available mortgage product in the market. This takes into account 

the borrower’s requirements and financial circumstances and the provider’s lending criteria. Money Workout improves efficiency, transparency, and quality 

throughout the mortgage origination process, through a true whole-of-market, web-enabled solution. Through efficient lead generation, qualification and 

execution, Money Workout aims to remove 50% of the origination costs for mortgage companies. 

Semafone Ltd was founded in 2009 by a consortium of call centre professionals, who were instrumental in the development of ‘Semafone’; a fraud 

prevention software for use in call centres. Semafone aims to secure sensitive data passed over the phone, including bank details, personal identification 

data and credit/debit card transactions. Without interrupting caller and agent dialogue, customers input their card details via the telephone keypad, 

eliminating the need to read out the card number and three digit security number to the phone operator, removing the risk of operator fraud. The company 

has already secured a number of blue chip clients. 

Bowman Power is a leader in the development of clean power generation technology, designed to substantially increase the performance of standard 

diesel and gas fuelled engines. Based in Southampton, Bowman Power’s core product is a turbo-generator, which recovers waste heat from engines, in 

order to both boost their power and efficiency, whilst reducing their emissions. Bowman Power is the first company worldwide to emerge with economical, 

production grade solutions to turn waste heat from exhausts into electrical power. 

Elonics is a semiconductor company specialising in the design and development of multi-band radio frequency integrated circuit products. Founded in 2003 

and based in Livingston, United Kingdom, Elonics has developed an innovative radio frequency architecture called DigitalTune that is the foundation for 

a family of silicon tuners for television and radio. Elonics’ innovative technology allows manufacturers to design high performance consumer electronics 

products with unrivalled performance, power consumption and low system cost. 

Founded in 2005, PrismaStar is a ‘software as a service’ business providing patented technology to help consumers shopping online find the very best 

products and services, personalised to their individual tastes. You can trial the company’s technology by visiting: http://www.prismastar.com/our-solution/ 

answeroil-demo/. 

Executive Channel installs digital screens in office buildings which it uses to display advertising, up-to-date news and travel information via the Internet. 

These screens are usually located in the elevator lobby to engage an exclusive audience, with high spending power in an uncluttered environment. The 

Company is leveraging the industry move in the media market from static billboards, to interactive digital formats. 

Curlet Ltd (10CMS) is a leading Commerce Content Management platform for global brands and retailers. The 10CMS platform enables retailers to deliver 

consistent, differentiated retail experiences across digital platforms, via the most advanced mobile devices and web browsers. 

10CMS’s Commerce Content Management platform provides online retailers with a single, intuitive toolset with which to quickly add interactive content 

modules to existing eCommerce web sites. Modules such as Carousels, Collections, Buy the Look and Shop Landing Pages enable retailers to merchandise 

from existing media with the addition of ‘Select and Buy’ options, and to showcase more products on high traffic web pages. As a result, 10CMS customers 

report significant improvements in conversion rates (up more than 50%) and average order values (20% or more), as well as a tenfold reduction in costs. 

Diverse Energy builds an emission-free, low-cost power solution for mobile phone communication towers in rural areas of developing countries. It has 

developed the PowerCube, a standalone replacement for the polluting diesel generators that are currently used as remote power supplies for mobile 

phone towers in areas where electricity is not available. It delivers power in a highly efficient way with low fuel and maintenance costs, thus offering a 

25% reduction in total cost of ownership with a two year payback. Diverse Energy has designed an innovative, proprietary technology that allows the 

PowerCube to utilise ammonia as a fuel. When compared to traditional diesel generators, the PowerCube provides an 80% reduction in greenhouse gas 

emissions, a 74% reduction in energy use, and eliminates both local noise and air pollution. 

UltraSoC Technologies Ltd is a pioneering company developing advanced debugging technology for the embedded electronic systems increasingly used 

in many everyday products, from cars to mobile phones. The Company is developing next-generation, silicon Intellectual Property (IP) that addresses the 

burgeoning challenges of debugging the application software that provides the functionality and performance in modern electronic products. 


15



Michelson Diagnostics is the medical equipment and scanner specialist, whose unique laser scanning technology can image skin and other surface tissue 

at a much higher resolution than ever before. The Company’s first product based on its patented technology, the VivoSight scanner, may revolutionise the 

market for the non-invasive diagnosis and treatment of non-melanoma skin cancer (NMSC). The VivoSight scanner has already won CE & Food and Drug 

Administration (FDA) regulatory clearance for clinical use in Europe and the USA, and is now being trialled by leading skin cancer specialists at their clinics, 

with the objective of three US Key Opinion Leaders (KOLs) using the technology by year-end. 

Vega-Chi enables institutional investors to trade convertible and high-yield bonds directly with each other without having to go through intermediaries. It 

provides an alternative pool of liquidity where participants can achieve best price execution, transaction cost savings, improved liquidity and anonymity. 

Furthermore, the Vega-Chi trading system offers full pre-trade and post-trade transparency and access to full historical data allowing investment managers 

to make better informed decisions. 

Applied Superconductor Ltd is a specialist developer and producer of high efficiency devices for utility and industry electrical networks employing 

superconductor technologies in the area of fault current management. The Company’s Superconducting Fault Current Limiters protect high-voltage 

electricity networks from the damaging effects of faults by blocking current surges that arise when short-circuits occur. The Company’s solutions reduce 

asset management costs whilst improving network safety, stability and efficiency. Fault Current Limiters support the connection of renewable energy 

generators to distribution networks assisting the industry to meet the Low Carbon Policy targets. 

Source: Octopus Investments 

TABLE 9: Tax Efficient Review Estimate of Total Charges over a five year period for Octopus Eureka EIS Portfolio Service 

Initial charge 2.5% Initial fee (excl 2.25% commission) No VAT 2.50% 

Annual management charge 1.5% +VAT (assumes 0.5% trail rebated) +RPI 1.80% 

Annual operating costs None 0.00% 

Transaction specific costs Dealing charges 1% no VAT on purchase and sale of shares 1.00% 

Performance hurdle 

Realised returns in excess of the total amount originally invested in all of 

the companies (ignoring all tax reliefs) 

0% 

Performance Fee 20% with no hurdle 20% 

Custodian Fees-Admin per annum None £0 

Investee companies- arrangement fees 3% no VAT and no charge on 25% AIM component 2.25% 

Investee companies- annual monitoring fees 1.25% no VAT, no charge on AIM and excludes portion not kept by Octopus 0.23% 

Investee companies- Exit fees 1.5% noVAT on non AIM portion of portfolio 1.13% 

Number of investee companies 15 

% of fund invested Fluid but aim to be fully invested inside 18 months 

Assumed growth* Tax Efficient Review assumption 5.0% 

Year 1 Year 2 Year 3 Year 4 Year 5 

Year 1 Year 2 Year 3 Year 4 Year 5 

Value of portfolio beg year £100,000 £97,223 £100,247 £103,365 £106,579 

Less Initial charge £2,500 £0 £0 £0 £0 

Less Transaction fees £975 £0 £0 £0 £1,066 

Less Annual Operating Charges £0 £0 £0 £0 £0 

Less Annual management charge £1,737 £1,750 £1,804 £1,861 £1,918 

Less Arrangement fee £2,194 £0 £0 £0 £0 

plus Assumed growth* £4,630 £4,774 £4,922 £5,075 £5,180 

Monitoring fees £224 £224 £224 £224 £224 

Exit fees £0 £0 £0 £0 £1,224 

Performance Fee £0 £0 £0 £0 £1,965 

Value of portfolio at year end £97,223 £100,247 £103,365 £106,579 £105,586 

Total cumulative charges £7,630 £9,605 £11,633 £13,718 £20,116 

This table is to illustrate the effect of total charges on a £100,000 portfolio invested for five years. 

Level of charges and number of investee companies based on data provided by the portfolio manager. 

*Assumed annual growth rate of investee companies is made by Tax Efficient Review for modelling purposes only. 

No estimate is either intended nor implied. Investee company values can go down as well as up. 

Table 10: Fees for providers at assumed 5% annual growth rate 

(No prediction made or implied) 

Exit value 

(pence) 

IRR 

IFA/Provider 

Fees 

Performance 

Fee 

TOTAL FEES 

Calculus 107 10% £16,537 £2,140 £18,678 

MMC 107 13% £20,126 £1,788 £21,914 

Eureka 105 12% £18,150 £1,965 £20,116

Tax Efficient Review of Octopus Eureka EIS Fund with ... - Clubfinance

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