Graphite Private Equity Trust to liquidate portfolio

Graphite Capital Management’s Graphite Private Equity Trust is seeking shareholder approval to sell its remaining portfolio of unquoted investments and to be placed into members’ voluntary liquidation. As the trust’s holdings are minority investments, the board believes it would be difficult to find one buyer for the whole portfolio. So it has approached Graphite Enterprise Trust, also managed by Graphite Capital Management and the group’s largest quoted investment trust, which it considers to be the most appropriate buyer. Graphite Enterprise Trust has subsequently agreed to buy the portfolio for a cash consideration of £10.8 million subject to shareholder approval. Graphite Enterprise Trust is an evergreen fund and will realise the Graphite Private Equity trust portfolio as and when suitable opportunities arise.

Martin Crayton of Graphite Capital Management said of the decision to sell the portfolio: “It was becoming uneconomic to run the trust and the best way to return cash to the shareholders was to sell it.”

Graphite Private Equity Trust was established in March 1994 with an initial life of ten years. A total of £25 million was subscribed in two equal instalments of £12.5 million in 1994 and 1995. In June 1999, the board proposed a restructuring to shareholders under which the company would cease to make new investments and would distribute cash to shareholders through a progressive repayment of capital. Under this restructuring a maximum amount of £25.75 million could be returned to shareholders after which the board stated that it would consider how the remaining capital should be distributed.

Since then substantial proceeds have been received from the realisation of investments allowing the company to make capital repayments to shareholders between October 1999 and December 2001 of the maximum amount of £25.75 million. Since 31 March 2002 one further investment has been realised. As the company had repaid the maximum amount permitted under the court approval in 1999, no further repayments could be made to return capital to shareholders without another reconstruction of the company’s balance sheet. This would incur significant costs and the disposal of remaining investments would have taken a number of years.

Under these circumstances the board decided that the portfolio should be sold and the company put into members’ voluntary liquidation allowing the net asset value to be distributed to shareholders in cash. The trust’s largest shareholders have been consulted regarding the proposals and shareholders representing in aggregate of 74.8 per cent of the issued share capital have indicated that they intend to vote in favour of the decision.

Graphite Capital Management manages three private funds and three publicly quoted vehicles with funds under management in excess of £500 million.