Update on Reconstruction (3426B)

TIDMENG

RNS Number : 3426B

Electric & General Inv Tst PLC

16 February 2011

Electric & General Investment Trust PLC

Update on Reconstruction Proposals

The Board of Electric & General Investment Trust PLC (the "Company") announced at the end of last year that it intends to put forward proposals to offer shareholders the choice of rolling over their investment without triggering a charge to capital gains tax into an open ended fund, to be managed by Taube Hodson Stonex ("THS"), or realising all or part of their investment for cash.

The Board is now in a position to further update shareholders on the likely timing and outline content of these proposals.

The Board has determined, following a review of all options including possible closed ended alternatives, to put forward, in due course, innovative proposals which it believes will be attractive to shareholders.

The Board proposes to create a new independent open ended investment company or OEIC (the "New Fund") which will be independently administered by Yealand Administration. The New Fund will have the following beneficial attributes:

- It will retain "Electric & General" within the title of the New Fund.

- It will adopt all aspects of a typical corporate structure as if it were a closed ended investment Company. Thus the New Fund will have voting shares, will hold AGMs and will have an independent board whose election is approved by shareholders and who are tasked with overseeing the running of the New Fund, including the appointment and/or dismissal of an investment manager. It is proposed that the initial members of the board comprise Gerry Aherne, John Pocock and Jonathan Ruffer. The New Fund's corporate governance arrangements will seek to replicate those of a closed ended investment company so far as possible.

- It will continue the Company's investment strategy and approach. It is therefore proposed that the investment manager will continue to be THS who will manage the assets of the New Fund in the same way as they currently manage the assets of the Company. Since their appointment as investment manager in 2004, THS has outperformed the MSCI World Index, the Company's benchmark, on a total return basis by more than 20%. It is expected that the yield on the New Fund will be broadly similar to that of the Company currently. THS has reassured the Board that there will be no impairment to the manner in which the investment portfolio is managed as a consequence of the change of corporate structure, save that a marginally greater amount of cash is likely to be held recognising the open ended nature of the structure.

- It will enable shareholders who wish to continue with their investment to do so in a more cost effective form. The Board expects the New Fund's total expense ratio will be lower than the present total expense ratio of the Company. THS has agreed a reduced investment management fee of 0.3 per cent. of net assets (the existing performance fee arrangement will continue to apply, as will the current cap of 1.0 per cent. on the aggregate of management fee and performance fee). The resulting total expense ratio will be determined by the amount of money rolled over, however it is expected that irrespective of the resulting size of the New Fund it will be at least 7 basis points better than that of the Company (on a pound for pound fund comparison basis).

- It will remove any discount risk-all shares are issued and redeemed at net asset value.

The Board believes the benefits of these proposals are:

- Shareholders have freedom of choice as to whether to continue with their investment or to realise their investment.

- If shareholders elect to roll over without triggering a charge to capital gains tax into the New Fund they will be electing for continuity of investment approach and strategy, but in a more cost effective form and with the removal of any discount risk. Shareholders will continue to benefit from the aspects of corporate governance that the existing structure facilitates.

Full details of these proposals will be published in due course. As a consequence of the regulatory process to establish the New Fund, including securing FSA approval, detailed proposals are expected to be circulated by 30 June 2011. The precise timing will depend on this regulatory process which cannot at this stage be predicted with any degree of certainty.

Enquiries

William Simmonds 02075882828

J.P. Morgan Cazenove

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