Each year a sample of portfolio companies are reviewed for compliance with the Guidelines. There continues to be a general improvement in the overall quality of reporting, with the updated Guidelines raising the standard across a number of areas as well as adding specific disclosure requirements in line with the wider listed environment.

Overall the most recent review demonstrated a good level of compliance across the majority of the Guideline criteria, with areas focusing on discussion of performance and presentation of financial KPIs being consistently good across the population reviewed. We also note that there was increased presentation and discussion of non-financial KPIs and these metrics are often of greater insight in discussing strategy and performance, as financial measures can dominate annual reports but not address the full strategic aims of a business.

The observations below reflect the trends identified from the most recent review, where additional focus will result in an improved level of reporting:

• The topic of gender diversity needs to be a greater feature of the annual report, with stronger narrative on the policies in place as well as presenting the breakdown of the metrics for the number of people of each sex at the director, senior manager and employee level – refer to section 15 of this guide for further detail.
• The inclusion of commentary on human rights is a requirement under the Guidelines and this is in line with increasing regulatory emphasis, such as the introduction of the Modern Slavery Act 2015 (impacting financial years ending on or after 31 March 2016). All companies need to consider how they are addressing compliance with human rights matters and include a discussion on this, which could be considering the supply chain aspects or labour practices in the UK and overseas – refer to section 14 of this guide for further detail.
• The presentation of a business model is an essential part of understanding the business. This has been a weaker area as a new requirement, though this can be easily addressed by ensuring it articulates how the business creates value and linking this to the strategy – refer to section 10 of this guide for further detail.
• Areas that have been a permanent feature in the Guidelines that are specific to private equity continue to be important and these should be addressed to a high standard. The identification and discussion of the private equity firm should be transparent and this also extends to the detail of the board composition – refer to sections 1 and 2 of this guide for further detail.

As the corporate reporting legislative environment evolves the level of disclosure and emphasis on areas will continue to expand. As an example the 2014 UK Corporate Governance Code (‘the Code’) raises the bar on the way businesses think about, manage and report on their principal risks and culture as well as viability. It applies to premium listed companies for periods beginning on or after 1 October 2014. The Guidelines have not been updated to specifically address this, though it is expected this will raise the benchmark for reporting in this area, which is already represented in the Guidelines through the review of financial position and principal risk areas.

All the Guideline areas require careful consideration to ensure good practice can be achieved and this guide provides both an understanding of what good practice looks like and some actual examples from the most recent review. The examples set out elements of good practice for the specific criteria disclosed. The Group will review the disclosures in the annual report as a whole when reviewing compliance.