Investment Trust Share Registers: 5 Unique Needs

1. Managing discounts

Investment Trust share prices don’t always reflect the value of underlying assets of the trust for a variety of reasons and Boards actively manage their discounts and premiums to ensure their shares trade as close as possible to the underlying net asset value (NAV). This is key as discounts can signal a lack of investor confidence, potentially discourage new investment and may impact the trust's capacity to raise capital. Managing the discount can also improve returns for shareholders by narrowing the gap between the share price and the NAV.

As your Investment Trust Registrar, EQ will facilitate the management of your issued share capital in response to market forces. Buybacks - either for cancellation or to be held in the treasury - and allotments of new shares are handled by our experienced specialist team. These movements are kept in view as part of our daily routine with all the right processes in place to liaise with other branch registers (if required) and for the reconciliation of the ISC in a manner that works for you.

Our team of experts are happy to talk to you or your brokers about how the different mechanisms operate, and what we need from you. We can also share tips on how to ensure instructions flow through as efficiently as possible.

2. FATCA (Foreign Account Tax Compliance Act) and CRS (Common Reporting Standards)

Under FATCA and CRS, Investment Trusts are classified as Financial Institutions and have obligations to collect financial account information on some of their shareholders and share this with HMRC for onward transmission to the tax authorities of the country of residence of that shareholder.

Since the introduction of CRS in 2016, we have been evolving our approach to supporting our Investment Trust clients in this regard, keeping pace with the changes made by HMRC. We have robust reporting processes in place for monitoring your share register; identifying shareholders where further information needs to be sought, requesting and capturing this information then reporting this annually to HMRC on your behalf. We share the report each year once ready for submission but otherwise, no other action is required from you, so it is taken completely off your hands.

Any follow-up queries relating to the submissions can also be handled directly between EQ and HMRC and we make ourselves readily available for discussions around any of our processes or data.

3. Dealing with investor activism

When a proxy fight occurs, it is essential that you assemble the right team and have a response plan in place. At EQ Proxy, we understand the implications of a proxy contest and work tirelessly to provide critical analysis and experience to mitigate these challenges. We will guide you through the entire process. We develop a strategic timeline and action plan, working alongside your brokers and financial advisors to engage and set up meetings with institutional investors. We leverage the results of our proprietary, data-driven vote projection models to provide continuous updates to the working group on the chances of success based on feedback received during the campaign. We then develop an efficient strategy that effectively communicates your message to institutional and retail shareholder and other stakeholders.

Our specialist team of corporate governance specialists, corporate brokers and FCA regulated stakeholder engagement experts many years of experience working on activist defence campaigns, most recently supporting two of the investment trusts targeted by Saba.

4. Supplier due diligence

Investment Trusts typically conduct very thorough due diligence on their suppliers including their Registrar. This process often involves Board Members themselves as they are responsible for supplier oversight and monitoring, risk management and corporate governance.

To help with this, EQ commission a Type II AAF 01/20 Assurance Report annually which describes the control environment within our share registration business. The report is based upon the framework for transfer agencies as set out by the Institutes of Chartered Accountants in England and Wales Technical Release 01/20. The assurance report provides information for clients, prospective clients, and their auditors and AIFMs on how we effectively manage the risk in our business and how we operate the control environment we have in place. 
   
To accompany and supplement this report, we also offer our clients the opportunity for a review with our subject matter experts on areas of interest for the Audit Committee or wider board. This can take the form of one of our experts joining a scheduled call or if preferred, a review in person at our offices. We often host clients in this way, at our offices in Worthing and at our Customer Experience Centre in Birmingham and it provides the chance to have an open and honest review of EQ’s processes and controls, giving the assurances needed that Investment Trust data and shareholder service are in safe hands.

5. Corporate actions

EQ has an experienced and dedicated corporate actions team, with long-standing and trust relationships with many of the legal and corporate advisors in the sector. They act as a key point of reference for any potential transactions that impact the corporate capital structure and just as importantly, help to translate the legal and settlement timetabling obligations associated with CREST custodians and retail shareholders into practice. Their experience is vast and covers hundreds of different transactions completed over many decades but from an Investment Trust perspective typically cover such matters as 100% Tender Offers as required under the Company’s Articles for cancellation, secondary placing or cancellations, one-off tender offers and schemes of reconstruction under section 110 of the Insolvency Act 1986.