The board of Electric & General, one of the UK’s oldest investment trusts, has been slated over unusual restructuring plans.

The £326m company said on Tuesday it planned to offer shareholders the option of rolling their money into a new open-ended fund, which would offer many benefits of an investment trust in addition to daily liquidity.

Under the proposals, the new fund will retain some of the existing board members and the existing manager, Taube Hodson Stonex, with a reduced management fee of 0.3 per cent a year. Shareholders who do not wish to join will be offered a cash exit.

Shareholders and analysts were surprised by the proposals, particularly the decision to introduce a new type of structure and to retain the existing manager.

Investors who wish to take their cash out will have to wait until the Financial Services Authority gives its approval to the changes in the summer.

Simon Elliott, an analyst at Winterflood Securities, said that for those that did not like the new structure, an exit could trigger capital gains tax.

The board originally proposed winding the company up last November because of the shares’ persistent discount to net asset value.

The shares had been trading at an 18 per cent discount amid lukewarm performance, with net assets rising just 14.4 per cent over three years compared with a 23.4 per cent rise in the company’s benchmark, the MSCI World.

John Newlands at Brewin Dolphin, a shareholder, expressed surprise that the board would stay with the manager because of its lack of progress on the discount, which had widened from 10 per cent when the board replaced Henderson as manager in 2004.

“Turning a 120-year-old investment trust into a different type of fund with no revenue reserves and a myriad of likely additional charges is a financial experiment too far,” he said. “I suspect shareholders will be strongly tempted to vote against these proposals.”

Alastair Smith, director of Frostrow Capital, which provides marketing services to investment trusts, said it was “astonishing” the board had not conducted a beauty parade with other managers.

Before the announcement, the board was understood to have consulted with other shareholders, who approved the plans.

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