Electric & General Investment Fund: As at International / Equity Growth

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1 Investment Manager s Commentary (1 st March 2014 to 31 st March 2014) Equity markets went through a period of volatility during the first quarter as concerns over the situation in the Ukraine and worries about a slowdown in China weighed on sentiment. Towards the end of March however, the mood improved. Geopolitical tensions began to ease and there was some confidence in China s determination to stimulate the economy as necessary. In the US, encouraging employment figures provided further evidence that the recovery is gaining traction; this will allow a further round of tapering to be absorbed by the economy. In the eurozone the perceived risk of deflation ensures that monetary conditions will remain loose for some time, which should support the on-going recovery in the region. During the month we finished buying Indra Sistemas, the IT services company -which forms part of our theme linked to Spain s recovery - and continued to top up Archer, the oil services company. We took advantage of price weakness to add to The Fresh Market, a US high quality supermarket chain which fits in with our ageing west theme and bought further shares in Royal Bank of Scotland following a meeting with an analyst. The St Joe Company, which owns a large area of development land in Florida, was topped up after a visit to the company. St Joe has a significant amount of cash on its balance sheet and we are confident that the management will deploy this sensibly and to the advantage of its shareholders. Resolution to the issues surrounding Banca Monte dei Paschi di Siena is becoming clearer and we therefore bought more shares, bringing the holding to a full position. In March, a new investment was made in Telecom Italia. The current valuations of telecom companies in Europe imply that these businesses will remain in terminal decline. In Telecom Italia s case, we believe that the market s pessimism is overblown and does not adequately reflect the potential for average revenue per user ( ARPU ) improvement in the mid-term as the market structure rationalises, high-speed broadband is rolled out and consumer spending levels recover. Telecom Italia is well-placed to benefit from positive shifts in its domestic market, including a long-needed loosening of the EU regulatory grip, the removal of obstacles to industry consolidation and investment in high-speed broadband. (Italy s average broadband download speeds are currently about a quarter of other major European peers). In the mid-term, the company is likely to benefit from improving economics and increasing pricing power. Italy s ARPUs are low compared with other countries and are unlikely to continue to decline if industry consolidation takes place and/or high speed broadband is rolled out. Telecom Italia should also benefit from growth in mobile data - usage in Italy is growing at over 70% p.a*, further supporting ARPU growth potential. Investors should benefit from even relatively modest upticks in ARPU because of Telecom Italia s operating leverage: we estimate that every 1 increase in ARPU leads to an increase of around 20% in EPS. We believe that the market is too focused on Telecom Italia s shortterm, addressable problems and is undervaluing the company s longerterm upside potential. At current prices, the company is yielding 9% 2014 (estimated) unlevered free cash flow ( FCF ) and 17% 2014 (estimated) equity FCF*, providing an attractive base from which to build a position. Telecom Italia provides fixed line, mobile and data transmission services in Italy and overseas, particularly Brazil and Argentina. a Discrete Annual Performance (%) 12 Months Ending We continued to take profits from Lagardere, which has performed extremely well. Taube Hodson Stonex Partners LLP, April 2014 *Source: Redburn Partners LLP as at 17 th January 2014 Other data is sourced from THS research March 2014 March 2013 March 2012 March 2011 March 2010 NAV Morgan Stanley Capital International World Index in Sterling Note: Price is month-end mid-price. Benchmark is not total return index. Returns quoted in Sterling, net of fees Source Bloomberg Past performance is not a guide to the future. The value of the shares and the income from them can go down as well as up and you may not get back the full amount originally invested. Cumulative Performance to (%) 1 Month % 3 Month % 6 Month % YTD % Since Inception % NAV Morgan Stanley Capital International World Index in Sterling Note: Price is month-end mid-price. Benchmark is not total return index. Returns quoted in Sterling, net of fees. Source: Bloomberg Past performance is not a guide to the future. The value of the shares and the income from them can go down as well as up and you may not get back the full amount originally invested.

2 Top Ten Holdings (as at close ) 1 TAG Immobilien AG 3.54% 2 Schibsted ASA 3.42% 3 CaixaBank 2.97% 4 BNP Paribas SA 2.57% 5 ING Groep Nestle SA Gagfah 2.46% 8 Sacyr SA 2.44% 9 Vivendi 2.39% 10 UniCredit S.p.a. 2.26% NAV per Share Performance to Source: Bloomberg Past performance is not a guide to the future. The value of the shares and the income from them can go down as well as up and you may not get back the full amount originally invested.

3 Sector Allocation Materials 7% Telecommunications 6% Energy 7% Healthcare 2% Technology 4% Cash & Fixed Interest Utilities Financials 35% Industrials 14% Consumer Staples 10% Consumer Discretionary 13% Source: MSCI Sectors Geographical Allocation United Kingdom 12% Pacific Ex Japan 5% Cash & Fixed Interest Japan Europe Ex UK 59% North America 22%

4 Currency Weightings (Including Cash & Hedge) Compared to MSCI World as at Electric & General (% ) Index: MSCI World (% ) Australian Dollar British Pound Canadian Dollar Danish Krone Euro Hong Kong Dollar Israeli Shekel Japanese Yen New Zealand Dollar Norwegian Krone Singapore Dollar Swedish Krona Swiss Franc U.S. Dollar E&G Details by Currency (Including Cash & Hedge) Compared to MSCI World as at

5 Investment Objective The Company's investment objective is to seek to achieve long-term capital growth with some potential for income. To achieve the investment objective, the Company s investment policy is to invest principally in a portfolio of global equities, and may also invest in other transferable securities, bonds, units and/or shares in collective investment schemes, warrants, money market instruments, cash, near cash and deposits. There is no limit to which the Company can be invested in each sector or asset type, nor is there any particular geographic focus. The Company may borrow and may enter into underwriting arrangements. It is the ACD s intention that derivatives and forward currency transactions will only be used for the purposes of efficient portfolio management, including hedging, as defined by the Regulations. From time to time the liquidity of the Company may be increased substantially if judged to be in the interests of investors. Charges Basic Management Fee: 0.3% of net assets per annum. Performance Fee: 10% of the outperformance versus the MSCI World Index in Sterling over the relevant performance period (maximum of 0.7% in a period of increase and 0.3% in a period of decrease of net assets). Fund Details Total Gross Assets: IMA Sector: 103,374, (As at ) Global Dealing: Dividends: Daily February & August NAV Frequency: Investment Manager: Daily Taube Hodson Stonex Partners LLP Legal Status: Authorised Corporate Director: Open Ended Investment Company Carvetian Capital Management Limited Wrapped Products The shares of Electric & General Investment Fund ( Electric & General ) are offered within the Alliance Trust Savings Scheme and ISA. Further details can be obtained from the How to Save section of the Electric & General website on or by calling the Investor Services Helpline on Important Information The prices of shares in open ended investment companies and income received from them can go down as well as up and investors may not get back the full amount invested. Past performance is no guarantee of future performance. Quoted yields are not guaranteed. Changes in the rates of currency exchanges may have an adverse effect on the value or price of the shares. Investments in a currency other than your own currency will be subject to movements in foreign exchange rates. Reference to any specific securities should not be construed as a recommendation to buy or sell these securities but is included for the purposes of illustration only. Investors should also note that the views expressed may no longer be current and may have already been acted upon. The Fund may invest in emerging markets which tend to be more volatile than more established stock markets and the value of your investment could move sharply up or down. If you have any questions about the suitability of this investment for your portfolio, you should contact an independent financial adviser. Nothing in this factsheet should be construed as advice nor be considered an offer or solicitation to deal in investments. Issued by Taube Hodson Stonex Partners LLP, which is authorised and regulated by the Financial Conduct Authority, (Firm No ). Registered office: Cassini House, 1st Floor, St. James s Street, London, SW1A 1LD (OC333502).