Proposals: future development

Graphite Enterprise Trust PLC
03 May 2007


                         ANNOUNCEMENT TO STOCK EXCHANGE

                         GRAPHITE ENTERPRISE TRUST PLC

                                   3 May 2007

                PROPOSALS IN RELATION TO THE FUTURE DEVELOPMENT
                                 OF THE COMPANY

The Board of Graphite Enterprise Trust PLC (the 'Company' or 'Graphite
Enterprise') announces that a circular has been posted to the Company's
shareholders today containing details of proposals in relation to the future
development of the Company.

Background

Since it was established in 1981, Graphite Enterprise has invested in unquoted
companies. For most of its life, the great majority of the Company's investment
portfolio was in direct investments made by Graphite Capital Management ('
Graphite Capital') and a minority was in funds managed by third parties. At the
end of 1999, following a strong period of realisations, the Company's assets
were held largely in cash and in quoted investments retained following
flotations. As a result, the Board announced plans in early 2000 to increase
investments in funds and since then funds have become a significantly larger
part of the investment portfolio. However, as realisations have been
exceptionally high in the last three years the Company has continued to hold
high levels of cash and near-cash.

Proposals

To reduce the level of cash and near-cash, to ensure that the Company is more
fully invested and to reflect the increased emphasis on investments in funds,
the Board is proposing to:
     
•    Amend the investment objective

     The current investment objective of Graphite Enterprise is to provide
     shareholders with long term capital growth through investment in unquoted
     companies, both directly and through specialist funds. Following the 
     Board's announcement in 2000 that it planned to increase commitments to 
     private equity funds, the importance of funds has grown and the importance 
     of direct investments has diminished.

     The Board therefore believes that the investment objective should be 
     restated as follows to reflect the increased emphasis on funds: 'The 
     objective of Graphite Enterprise is to provide shareholders with long term 
     capital growth through investment in unquoted companies, mostly through 
     specialist funds, but also directly.'

•    Increase the level of overcommitment to funds

     The Board believes that the Company should be significantly more 
     overcommitted than it is at present but that the overcommitment policy 
     should remain conservative. The Board will continue to monitor the level of 
     overcommitment regularly in discussion with Graphite Capital and does not 
     expect to take on long term borrowings. However, short to medium term 
     borrowings may be required from time to time but are unlikely to exceed 25% 
     of net assets.

•    Return capital to shareholders through a more active share buy back 
     programme

     Increased commitments to funds alone will not result in a significant 
     increase in the level of investment in the short term.  To address this, 
     the Board intends to return capital to shareholders through a more active 
     share buy back programme.

     The value of shares to be bought will depend on the investment 
     opportunities available to the Company, the rate at which investments are 
     made and on stock market conditions.  Depending on these factors, the 
     Company envisages buying back shares with a maximum total value of £70 
     million over the next twelve to eighteen months.
     
•    Invest in funds managed by Graphite Capital ('Graphite Funds') on 
     substantially the same terms as third parties

     The Board is proposing to make a commitment of £50 million to Graphite 
     Capital Partners VII ('GCPVII'), a fund currently being raised by Graphite 
     Capital, and a further commitment of £20 million to a fund being raised 
     alongside GCPVII to invest in larger transactions.  The Board is also 
     seeking approval to invest in future Graphite Funds on substantially the 
     same terms as third parties, as described in the next section.

•    Revise the fee and incentive arrangements with Graphite Capital
           
     -    Management fees and charges

          The Board is proposing to make two changes to the fee arrangements 
          with Graphite Capital.

          Under the current arrangements Graphite Capital effectively receives a 
          fee of 1.5% on both the investment portfolio and on cash and 
          near-cash.  The Board is proposing to remove the fee on cash and 
          near-cash and to replace it with a fee of 0.5% on outstanding 
          commitments to funds.

          The Board is also proposing that the Company should cease to benefit 
          from the current arrangement under which the higher management charges 
          in Graphite Funds are reduced by an offset mechanism.  The effect of 
          this change would be to bring the charges on investments in Graphite 
          Funds into line with those paid by third parties.  No other management 
          fees or charges would be payable by the Company on any investment in 
          or commitment to Graphite Funds.

          The financial impact of the proposed changes will depend on a number 
          of factors, but if the Company becomes more fully invested the Board 
          expects the overall fees and charges paid to Graphite Capital to rise.  
          However, the Board is satisfied that overall the proposed level of 
          management fees and charges is reasonable, particularly by comparison 
          with fees paid to managers of other listed companies with private 
          equity portfolios.
     
     -    Incentive arrangements

          The incentive arrangements were originally devised primarily for 
          direct investments in unquoted companies rather than for investments 
          in funds. Largely as a result of this, there are a number of anomalies 
          in the current arrangements that the Board is proposing to resolve.  
          The Board believes that the impact on the Company of the proposed 
          changes to the incentive arrangements is unlikely to be material.

An Extraordinary General Meeting will be held at 12 noon on 24 May 2007 (or as
soon thereafter as the Company's Annual General Meeting shall be concluded or
adjourned) in order to approve the proposals outlined above.

Enquiries:

William Eccles, Graphite Capital Management, 020 7825 5300

Tim Spence, Graphite Capital Management, 020 7825 5300



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